Last Updated on December 18, 2019 by Mark Lavington
Are you fully covered?
Holiday Home Insurance A guide to calculating your Sums Insured. Our holiday home insurance may give you peace of mind should the worst happen, however you’ll need to give us the correct buildings and contents sum insured so that we can ensure the right amount of cover is provided.
Why do I need to choose adequate Sums Insured?
It is important that your sums insured are sufficient to cover the cost of rebuilding, repairing or replacing your property, because the sums insured are the maximum amounts we will pay in the event of a claim for loss or damage.
What happens if I am underinsured?
Selecting an inadequate sum insured may mean that you have to find part of the cost from your own savings or by borrowing. This guide is designed to help you as a furnished holiday let owner arrive at proper sums insured for:
- The Buildings
- The Contents
- Loss of Rental Income
It is important not to underinsure your property for the following reason. “If the property insured at the commencement of any physical loss or damage to such property be collectively of greater value than such sum insured (adjusted for index linking) you will be considered as your own insurer for the difference and shall bear a rateable proportion of the loss accordingly”. This means that if you only insure for 50% of the reinstatement value of your property or contents you stand to have any claim payment reduced by a half. The guidance below will help you calculate the right figure.
Your holiday home buildings sum insured should represent the amount that you would have to pay to rebuild the property including statues, fountains and hot tubs permanently fixed into the ground, swimming pools, tennis courts, paths, drives, terraces, patios, walls, fences, hedges and gates, fixed aerials, satellite dishes, wind turbines, solar panels, yards, car parks, roads and storage tanks. In addition the following costs should be considered:
- reasonable architects’ surveyors’ consulting engineers’ and other professional fees
- the cost of complying with European Union legislation Local Authority Buildings Regulations or other statutory requirements up to 15% of the sum insured by the relevant item
- the cost of remaining debris demolition shoring-up or propping
Internally you will need to consider fixtures and fittings such as built in bedroom furniture, kitchens and bathrooms as well as redecoration.
The Association of British Insurers’ (ABI) rebuilding cost calculator http://abi.bcis.co.uk/ is designed to help you assess the rebuilding cost of your property, if it falls within a range of standard house types. There is of course no substitute for instructing a professional Surveyor to prepare a Rebuilding Cost Assessment for insurance purposes.
Finding a Surveyor Professional advice can be obtained from a Chartered Surveyor: the RICS web site can be used to search for a Chartered Surveyor in your area.
Your Holiday Home Insurance buildings sum insured may be index-linked (ie its adjusted according to inflation), however it is important that the sum insured was correct at outset and that it is increased to reflect improvements that you make to your holiday home property, such as adding an extension, conservatory or designer kitchen.
Your holiday home contents sum insured is the total value of replacing your holiday home contents with new items, should there be a total loss eg in the event of a fire. It’s important that your sum insured is correct so that Ecclesiastical can quickly pay any insurance claims you make.
The most effective way of working out your contents sum insured is to draw up an inventory of all the contents in your holiday home, room by room. Against each item write the replacement cost for a similar brand new item. In respect of books, works of art, television and audio visual equipment, unless agreed by us, a £1500 single article limit and £5000 any one property applies. Index linking may apply to the contents section of your Holiday Home Insurance policy, however it is important that you review your sums insured at renewal to take account of additional purchases and replacement costs.
Loss of rental income
Our Holiday Home Insurance Policy provides loss of rental income cover following an insured peril, which consequently renders the holiday home uninhabitable. As it may take some time to rebuild a holiday home levelled by fire or damaged by flooding; cover is provided for up to two years. As standard you will be insured for up to £75,000, however additional cover is available should your projected gross holiday letting income exceed £37,500 per year (£75,000 over two years).
What should you do now?
Once you have reviewed your sums insured, should you need to adjust your holiday home insurance policy cover or require any additional guidance please contact a member of our Holiday Home Insurance Team on 01237 429444.
The Association of British Insurers (ABI) rebuilding cost calculator
For further information on UK holiday home insurance visit the website page most relevant to you: