Rebuild error leaves landlord £100,000 short on fire claim

A landlord was left £100,000 out of pocket after a fire badly damaged a block of flats he rented out - and he discovered his insurance did not cover the costs of his claim. The landlord had failed to update the rebuild cost of the flats on his buildings insurance for some years, leaving the block underinsured. Insurance companies are warning landlords not to ignore changing rebuild costs when they take out buildings cover. The cost of rebuilding varies between properties, depending on the size and building materials of each property. Insurers warn not to confuse the rebuild cost with the property value - the two are different. Rebuild costs do not include the cost of any land, but will cover the cost of clearing the site in the event of a claim. Landlords buying or remortgaging will find the rebuild cost included on the property valuation. For guidance on how to work out the cost, visit the Building Cost Information Service web site, which has a handy calculator. While some insurers index-link rebuild costs, others leave any update to the landlord - so ask your buildings insurance provider how they calculate the cost. “It is recommended that a flat or maisonette is insured together with the other flats or maisonettes that make up the block, under a single policy arranged for the whole block,” advises BCIS. “This will avoid complications which may arise if units are insured individually, and will also ensure that you have the widest possible cover available, eg for common parts, which may not be available under an individual policy. “If it is not possible to insure the block then you may be able to take out a policy on an individual flat. To calculate the rebuilding cost of a block of flats you should seek professional advice.”

Landlord blog

Sam Dickinson

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