Published: 8 April 2025
How to make sure you have adequate insurance for full replacement of your home and contents
Over the past few years, insurer premiums have grown steeply, creating affordability challenges for many households, especially during an economic downturn. As a result, some people have reluctantly reduced their sums insured to reduce their insurance costs, leaving them underinsured and vulnerable if their property or possessions are damaged.
Recently, fewer weather-related events and increased insurer capacity have led to market changes, with premium levels expected to stabilise, especially in areas like motor insurance. Below are some steps homeowners can take to review and adjust their sums insured so that they remain accurate and up-to-date.
- Rebuilding cost vs. Market value: The sum insured for your home should reflect the rebuilding cost, not the market value. When buying a new home be sure to base the sum insured on replacement value not the purchase price – you don’t want to be overinsured either!
- Construction cost increases: Over time, construction costs tend to rise due to inflation or supply chain issues. It’s important to factor in these increases when adjusting your sum insured. Insurers will automatically calculate a percentage increase at each policy renewal.
- Recent renovations: If you’ve made significant upgrades or renovations (e.g., adding a new bathroom, or extensions), these changes will increase the value of your property.
- Home improvements: Don’t forget to factor in improvements that may have added value to your property, such as a high-end fixture, or room remodelling.
- Valuable items: Homeowners should regularly review the value of their personal belongings as items like jewellery and art can increase in value over time.
- Inventory check: Conduct an inventory of your belongings and update it as necessary. Ask your broker for a tool to help track your home’s contents, making it easier to maintain an up-to-date list of items.
- Impact of inflation: Inflation can impact many things, including the cost of labour and materials for rebuilding. If inflation rates are high, the cost to rebuild your home and replace contents can increase significantly.
- Increased repair costs: For items such as roofs, plumbing, or electrical systems, the cost to repair or replace these features can rise over time.
- Is your home fully covered?: Make sure your sum insured matches the current cost of rebuilding your home.
- Use an insurance calculator: Ask your broker for a tool that takes into account local construction costs, materials, and your home’s specifications to help you arrive at an appropriate sum insured. The Cordell Calculator is a great free guide to assist you to work out how much it might cost to rebuild your home.
- Consult with a valuer: Consider hiring a professional valuer or a quantity surveyor to assess your property. They can provide an accurate estimate of the rebuilding cost and help you ensure that your sum insured is sufficient.
- An estimate from a building specialist: An estimate of what it would cost to rebuild your home from a licensed builder or architect.
Your Rothbury broker will work with you to consider factors like the impact of your property’s location and any policy limits and exclusions. Get in touch so that they can guide you through the process of adjusting your sums insured.
Disclaimer: The information provided in this article is for general informational purposes only and does not constitute legal, financial, or professional advice. For specific advice tailored to your situation, please consult with a qualified professional.