Q. I recently had an estate agent round to value my house and there is a big difference between what the agent says my house is worth and the amount I have it insured for. Should I increase my insured value?
A. The market value of a home and its value for insurance purposes are two very different things. The estate agents’ figure indicates what your home is worth should you sell it, while the insured value is solely concerned with the cost of rebuilding it in the event of something like a major fire. The rebuild figure is almost always lower, mainly because it doesn’t take into account the value of the land on which the property sits. So, there shouldn’t be a cause for concern.
However, whether the insured value is actually correct is another matter altogether...
Generally speaking, insurance companies increase their valuations annually in line with inflation. However, this doesn’t necessarily mean that the figure is accurate; you may have significantly extended or improved your home over the years and unless you make a point of telling your insurers, they won’t have taken that into account.
As a general rule, I would advise you to check the insured value of your home every two or three years. It’s calculated by multiplying the property’s total external size (both upstairs and downstairs) by the estimated rebuilding cost per square foot or square metre, which can vary quite considerably depending on where you live and the type of property you live in - these costs are published by the Royal Institute of Chartered Surveyors and are available, at a price, from most qualified surveyors. Alternatively, the website of the Association of British Insurers’ includes a free building insurance calculator.
Once you’ve done your calculations, you can easily compare the result with the insurer’s valuation and if you’re not happy, ask them to change it.