Buildings Insurance
Buildings insurance covers the permanent structure of your property, including the roof, walls, windows, floors, plumbing and electrical wiring. In addition, the land on which the property is situated is also covered, along with the more permanent features of your home interior, such as a fitted kitchen or bathroom suite. Some buildings insurance will also include garages, sheds, greenhouses, driveways, patios, fences, gates and even your swimming pool or tennis court.
Essentially, anything that you are not likely to take with you if you moved out of the property can usually be covered under buildings insurance. Many comprehensive policies will also cover the cost of alternative accommodation if your property is temporarily uninhabitable, perhaps due to fire damage, and you have to move out.
The Amount of Cover
If you have a mortgage on your property, your mortgage lender is likely to insist that you take out buildings insurance. When you take out your mortgage, a survey of the property is usually carried out: this survey estimates the cost of rebuilding your house if it were destroyed, for example by fire. If you bought your house within the past year, the survey may still be considered up-to-date. Otherwise, you will need to ask a surveyor to estimate the 'rebuild cost' for you, or you could consult the Association of British Insurers (ABI) via their website, abi.bcis.co.uk, which offers an estimation service. The rebuild cost determines how much cover you require for your property: insurers will use this figure to determine your 'sum insured', which is essentially the amount of compensation you could claim in the event of the 'total loss' of your property. The rebuild value should include the total cost of rebuilding the entire structure of your property. This includes: building materials and labour, central heating system costs and plumbing and wiring costs, as well as the cost of hiring architects and surveyors, who must ensure that the rebuild conforms to the required UK standards.
It is essential that you purchase an appropriate amount of cover. Firstly, this ensures that if your home is destroyed, you are not without financial support. Secondly, the cost of your home insurance increases as the amount of cover increases; if you pay for unnecessary cover your home insurance will cost you more than it should, because any compensation paid to you will only equal the actual cost of repairing your home, and not the maximum sum insured. For example, if your sum insured is £200,000, but it costs only £160,000 to completely repair your property, you are effectively paying for forty thousand pounds' worth of unnecessary cover. For more information see Home Insurance Cover.
Rebuild Value versus Market Value
It is important to recognise the difference between the rebuild value and the market value of your property. The market value of the property is the amount for which you would expect the property to sell. In the UK, the location of your house has a large effect on its market value; this is mainly because certain areas are more desirable or have fewer available properties than others. This means that the market value of your property could be far higher than its rebuild value. Because of this, the sum insured is not likely to be equal to the market value of your property.
