Setting your own buildings sum insured

You can’t choose your buildings sum insured based on the worst that you think will happen i.e. “It will never all burn down”. This is called insuring on an estimated maximum loss. It doesn’t work like this. The insurer sets a premium based on the total sum insured, that way it’s fair on all policyholders.

If you deliberately underinsure you could be at risk of having your claim declined, reduced or even having your policy cancelled. The premium saving on having a lower buildings sum insured is rarely as much as you’d expect. That’s because insurers step down their rates as the buildings sum insured increases given that thankfully, these days, the chances of a total loss are slim.

Most insurers use a pretty low rate per £ insured after £500,000 of buildings and a lower rate than that at £1,000,000. Plus, as brokers, we can suggest other ways to reduce your premium such as risk management advice or a higher excess.

For guidance, and a review of your current policy, call 020 8256 4901.