Under insurance is becoming more prevalent across the UK with more and more people failing to get the right level of insurance for the value of their home and contents. This is exacerbated with listed buildings and high value home insurance where premiums are higher and required cover runs to many more thousands of pounds.

This is a real problem and often is only realised when it is too late, i.e. when a property owner needs to make a claim and see’s the shortfall in payout to value. As such, here we explain why so many listed buildings and high value homes are under insured and the implications of underinsurance.

The dangers of underinsurance

A ‘Condition of Average’ is a standard clause that is put in place within many insurance policies to protect against underinsurance. In the event of a claim, any pay-out will reflect the percentage of insurance. For example; if you have underestimated the value of your home and its contents by 50% you will only receive 50% of the amount claimed, irrespective of the value claimed, i.e. if your home and contents were worth £1 million, but you were only insured for £800,000, even if you were only claiming for £100,000 (well within the £800,000 cover you’ve agreed) the pay-out could still be restricted to £80,000, a significant shortfall.

High value homes and underinsurance

Of all property types, listed building and high value homes tend to fall foul of being underinsured most often. This can be for any number of reasons, it may be that the house price has risen without you necessarily being aware. It could be due to building condition or works that have been carried out in the recent past. It could simply be a result of an economic boom, new job opportunities or other positive influences in the area. All of these things, and more, can raise buyer demand and increase your property value. Influencing factors on property prices include:

  • Location
  • Condition
  • Features
  • Amenities
  • Listed status
  • History

Unoccupied property and underinsurance

Another reason many listed buildings and high value homes fail to have the correct level of insurance is due to the risks involved with unoccupied properties. Risk rises significantly if a home is vacant for 30 days or more. Damage due to vandalism, burst pipes and other issues are potentially much greater if left unresolved for an extended period of time and if a home is left empty for more than 30 days, it is important to take out unoccupied home insurance.

Extended periods like these are more likely when someone owns more than one property, and many people fail to realise that unoccupied property insurance isn’t just for when a property is under renovation, probate or awaiting sale. It also applies if homeowners are taken ill, on an extended holiday or are away from the premises for any other reason.

Related Reading: Listed Buildings Insurance Common FAQs

Undervalued contents insurance

A common reason for underinsurance within a listed building or high value home comes from the estimation of contents value. Many people assume that an insurance claim would result from a burglary and as such fail to take fittings, carpets and furnishings into consideration. This can be a particularly costly mistake in the event of a fire or flood where everything could be destroyed, but not everything is covered.

Valuables, collectables and other precious items

It is important to look closely at the level of contents insurance you have in place, especially if valuable antiques or works of art are kept at the property. This also includes collections such as fine wines, watches and jewellery.

Many policies set a single item limit to valuable items that may not cover your more precious items, so it can be useful to have a policy that doesn’t require you to list valuable items under a certain amount. That way you get the cover you need regardless of whether you purchase or inherit expensive items.

How to avoid being underinsured

Agreeing the correct level of cover for your listed building, even if it has been underinsured for years, may not make up the difference to your premium that many people expect, especially if you take out a combined policy such as high value home and contents insurance.

To avoid any nasty surprises, undertake regular valuations of your listed building and its contents, especially if it has been upgraded or expanded. Consider a detailed specialist valuation from an accredited surveyor or architect, especially when determining rebuild costs for insurance purposes, if your property is high value, in a sought-after location, listed, thatched or contains original features.

Take great care to evaluate your home contents. Be sure to take furnishings, carpets, fittings, fixtures, appliances and furniture into account and take out specialist cover for expensive items such as works of art, antiques, musical instruments, fine wines and jewellery. Keep a record of these specialist valuations and update them every few years.

And finally, do remember to take out unoccupied property insurance if your property will be empty for 30 days or more.

Note on underinsurance: The UK property market has been steadily increasing since the financial crisis of 2008. There are now over 750,000 property millionaires in Britain (property value over £1 million). However, if you’ve been living in your home for many years or it has been remodelled and redecorated then chances are it might be underinsured too.

Listed building insurance

Owning a listed building comes with certain responsibilities – one of which is ensuring that you have adequate insurance in place. By familiarising yourself with the basics of listed building insurance, you can ensure that your home and contents are properly protected against a range of risks, especially the shortfall of under insurance.

The information provided on this blog is for informational purposes only and is not intended to provide legal, financial or professional advice. The views expressed on this blog are those of the authors and do not necessarily reflect the views of the insurance company.

Related Reading: Listed Building House Insurance: Safeguard Your Heritage Property

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