Rental Property

Insurance is a vital part of being a landlord, protecting you and your property against a number of risks including theft, damage and even tenant injury, in cases where a claim is necessary. However, a shocking number of landlords are finding that they are underinsured when it comes to their policy and often accidentally.

From incorrect valuations to changes in economic inflation or even the cost of building materials, even the most careful of Landlords could find that they are underinsured if they need to make a claim. If you are new to valuations or haven’t checked your policy in a while, you could very well be underinsured – here’s what you need to know.

What Is Underinsurance?

Being underinsured can happen with any policy, whether you’re a landlord, business owner, homeowner or even a car owner. It is effectively the situation in which you do not have enough coverage through your insurance for what you need, which could lead to financial losses, damage to your reputation and more.

Without the proper cover, other parties involved in any claims may also lose out, or you may find that you cannot claim enough to cover the full costs of replacement, rebuilding properties, compensation and more. Underinsurance is a difficult thing to avoid as a landlord, particularly with the ever-changing economic climate, so it’s important to make sure that you are keeping on top of your insurance policies. How, you ask? Read on to find out!

What Causes Underinsurance?

Underinsurance is usually caused by the undervaluation of a property or asset, and most of the time, it’s entirely accidental. A significant number of Landlords are unsure of how to properly calculate the value of their property or how to adjust that valuation in accordance with economic changes. Typically, underinsurance can therefore be caused by:

  • Accidental incorrect valuation – In some cases, you have accidentally failed to value your property properly, whether you’ve used an older valuation, guessed at the price or have even forgotten to include certain elements such as loss of rent.
  • Economic inflation – The economic world is constantly changing, with interest rates rising and falling faster than most can keep up with. When this happens, the value of your property can change so it’s important to make sure you’re valuing your property regularly.
  • Changes to the cost of reinstatement (e.g. building materials, labour costs) – If the cost of a property changes with the economic climate, so too do the materials used to build that house. The total rebuild cost is included in your policy, and if this hasn’t been checked recently, you may find that your insurance leaves you short in case of a needed rebuild.
  • Accidental omission of assets – If you have certain assets at your property, including outbuildings, driveways and more, these need to be included in the property valuation. Without this, you may find that you are underinsured in case of these needing repair or replacement.

Whether you’ve forgotten to add the garden summer hours to the list, or you haven’t calculated the cost of the conservatory correctly, or the rebuilding costs have skyrocketed in your area due to material shortages, there are plenty of things that can cause you and your property to be underinsured.

In some cases, underinsurance comes about as a result of cost-cutting, including where some may have tried to cut corners to save money initially. Making sure you have a policy that is cost-effective but definitely covers you and your property is crucial – we can help you find the right Landlord insurance policy for your assets and even find the best price for that policy, without the risk of losing out in the future through underinsurance.

How To Make Sure You’ve Got The Right Cover

So you think you might be underinsured – how do you make sure that you get yourself back on track? Well, there are a few things you can do to ensure that you are not only valuing your property properly but that your insurance policy is the right one to suit you. Some things you can do to ensure the right insurance include:

  • Calculate the rebuild value regularly – The insurance you need isn’t the sale price of the property. In fact, the Buildings Sum Insured (BSI) is based on the rebuild cost if you were to completely start the property from scratch. This includes labour, materials, clearance costs and more. A professional surveyor can do this for you more accurately than you can likely do it yourself without support. You can find an approximate value using costs online, but a professional survey will help you ensure that this is as accurate as possible.
  • Review Your Insurance – if you have a policy but have been letting it renew and tick over, there’s a high chance that is it no longer accurate. Making sure that you review your insurance during the year will ensure that you are properly covered in case of an accident. 
  • Get The Right Insurance – You need more than just standard homeowners insurance as a Landlord. There is more to renting out a property than living in one, including additional risks (tenant damage, loss of rent) that need to be covered. Without a proper landlord insurance policy, you will not be covered for tenant damage.

If you are unsure if your insurance policy is suitable for your property, our team are on hand to help. We can help you not only determine the right policy for you but help you find the best coverage and the best prices to ensure that you are fully covered without a hefty cost. Simply get in touch with Ashburnham Insurance on 0800 1696137 to find out more.

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