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More on home insurance re-building costs

I’ve written in the past about the re-building costs of houses in 2009 and the impact that it should have on home insurance premium quotes.

The essential premise is that with the fall in the property market, the actual cost to rebuild your house should have fallen, and since that is part of what your home insurance premium is based on, your premium costs should actually be falling.

The Financial Regulator states that:

You should insure your home for the amount it would cost to rebuild it, or the reinstatement value. This is different to the market value of your home, which is what you would get if you sold it. You can get details of current rebuilding costs from the Society of Chartered Surveyors.

Yet, I have recently received three different complaints from people where their insurance company (or their mortgage company who requires the insurance as part of their T’s & C’s) have actually insisted that the person INCREASE the value of the property for insurance purposes.

I’m struggling to work out why mortgage providers would want to have these values overstated. Obviously they’d want to make sure they’re covered themselves, but if standard practice in the past was to accept the SCS rebuild cost values in the past, what’s changed now?

I know probably why are insurance companies doing this? They’re doing it so that they can charge higher premiums to bolster their profits (or reduce their losses).

What can you do?

  1. First of all, ask your insurance company for a written confirmation of their justification for seeking an increase in the value of the property being insured. You may need this later.
  2. Now check the updated Society of Chartered Surveyors Guide to House Rebuilding Costs for 2009. Work out the rebuild costs for your house, and ask the insurance company to insure your house on the basis of that value – explain where you got this value from, and confirm that this is what the Financial Regulator says that home insurance costs should be based on.
  3. If the insurance company still won’t insure for that value, then ask them again in writing to confirm why they won’t insure the house at that particular value.
  4. Submit an official complaint to your insurance provider along the lines of the fact that they’re going against the recommendations of the Financial Regulator with regards to how they should be valuing the house for rebuild cost purposes.
  5. If you don’t get anywhere with your complaint with your insurance provider, they you should raise a complaint with the Financial Services Ombudsman office.

Of course, you could just find the rebuild cost from the SCS documentation linked above and just go to a few other different insurance companies with the new numbers and get quotes from them. You’re likely to get a better quote from at least one of them, and you won’t have to deal with the crap above.

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