Home insurance for £2m plus

[down-in-the-dumps]

I have been reading thru' PPUK for at least a year now and I'm well aware of the skill sets here. It's a pleasure to be here, but I'm down in the dumps.

I have just read an email from my current buildings home insurer and they will not cover my Grade II listed late Georgian house (1820's). It is possible that when I went with them only a year ago I went for an under valuation even though I had in my hands on a rebuild costing of nearly £2.1M. I/ we were tight. I have owned the house since 1998. It has always been insured and have had no need to draw down ever. The out going party have asked me to tell other insurers that I have been turned down by them ... why?

I'm looking forward to your questions and I hope by now that I've got the correct answers.
So I am hoping that some of you posters can help me find an insurer.

John

 

[Cubist]

Presumably your current insurer gave you specific reasons as to why they will not be renewing your cover? Or are they simply saying that they will no longer be offering such cover to any potential customer - i.e. they are withdrawing from the market?

Legally the current insurer cannot 'require' that you inform any other provider of their refusal/withdrawl. However, most insurers will have a requirement that you disclose such information and may refuse to offer cover or cancel any coverage they may provide should they then deem that you have failed to provide such information.

 

[Kearn]

Feels like some fairly vital info is missing here… why were you refused insurance?

If you’d made a claim or been turned down for a fraudulent or similar reason, other insurers would have a right to know - but that info also tends to go on the database for all of them to see anyway.

Our broker works for Howden, since they bought the company he used to work for Very knowledgeable, and have some great policies

 

[down-in-the-dumps]

Thank you for starting, I'll take note of both pieces of advice, to date and from memory I haven't read and signed disclosers. But I can now see that I might be obliged in the future. No specific reasons were given, I can only think that I was dishonest at the time of my first approach to the com. by not disclosing the rebuild costs. And so now will not insure me.

I'm am now looking for other insurance comp. that I can approach. Any ideas.

 

[down-in-the-dumps]

Just off the phone, the underwriters declined to offer another year's cover.

 

[Cubist]

It's not unusual for Underwriters to withdraw coverage for high value/risk properties leaving the brokers to then find others to whom they can 'lay off' the risk. It is though very unusual to find that a broker has not demanded that you provide them with a Re-build Cost estimate for the property before providing a quote, and definitely not before taking the policy under risk. Fact is, the Rebuild Estimate is a 'Get out of Jail at At a Reduced Cost card for their use in the event that you make a claim - i.e. if you understate the estimate they will reduce the payout and if you overstate it they will also reduce the payout. If your broker did not demand or did not use your Estimated Re-build Cost then I might suspect that the broker pocketed the premium you paid and would have denied any claim had you ever made one - in other words, they were/are bandits.

There are many homes in the Central London area that would have a market value well in excess of £2M and a large number of those would be listed or otherwise protected. I am sure that there are any number of reputable brokers who would be happy to provide a quotation and will be up-front with you about the risks you may run were you to under insure the property.

 

[down-in-the-dumps]

Cubist, I'am taking note of your piece.
Well one of my neighbours is under valuing the house (same house) by 1m and they are happy with this. So as always people are prepared to take an awful lot of risk. I have yet to speak to others.

 

[Kearn]

Absolutely pointless insuring for an incorrect amount. You are then at best massively underinsured to the tune of 50%, worse not insured at all. So throwing money away.

Many of us would rather not insure, and just bank the premiums in case. But what you’re suggesting is allowing the insurers to do that instead.

There are insurers / brokers out there who can find good premiums and policies, but anyone credible will not insure without a rebuild cost valuation, refreshed every couple of years as costs change at such a rate lately.

I’m not really following the motivation to falsely under value the property.

 

[Gothichome]

We have been in this situation twice now, the excuse we got both times was the carrier was minimizing its exposure and liability. Old homes above two million to rebuild are just to burdensome on the bottom line. Our current insurer will rebuild but not like for like unfortunately. They will rebuild but to today standards of construction so I would lose all the plaster moldings and details.

 

[Flyfisher]

What I can't quite understand is why I cannot insure my house for an agreed maximum sum.

I assume insurers know all about risk statistics and calculate their premiums accordingly. So why can't I simply insure my house for, say, £1m and they quote me an annual premium for that amount of risk? What has the market value of the house actually got to do with anything, given that their maximum risk is £1m and that is covered by the premium? What could be simpler than that?

Sure, I'm taking a risk if I've under-valued my house because the most I can claim is £1m but, again, why is that a problem for the insurer as long as the premium cover that maximum pay-out risk. I really don't understand how and insurer can justify paying me less that £1m just because I've under-valued the house value. They've already set a premium to cover the maximum £1m loss so how does it affect them if my house re-build value turns out to be, say, £2m? They still only have to pay out £1m and that's the basis on which they charged the premium. In short, does undervaluing the house rebuild value affect their risk? I don't think it can because their risk is capped at £1m and that's already coovered by the premium.

Also, we all know that the costs of building a house can vary enormously. Even quotes from different builders can vary enormously but if someone decides to self-build (properly build it themself, not just contract a builder to build it for them) then the rebuild cost could be very much lower than a 'market re-build cost' - so how can we (fairly) decide an accurate rebuild cost anyway? Sure, we can pay for a 'professional' valuation (ker-ching!) but to cover themselves they are likely to be pessimistic and provide a valuation at the high end of the spectrum, which naturally increases the premium . . . perhaps unrealistically but how can we ever know until the worst happens and we need to claim the full amount.

So, what I'd really like is an insurance policy that will pay out up to £1m and I will bear any loss above that - my rationale being that while I may not be able to rebuild my house to the previous size or standard, £1m is not exactly going to leave me homeless - which is ultimately what house insurance is all about, isn't it? With such a policy, all the angst and risk of determining an accurate re-build value disappears because the real risk (to the insurer) the agreed maximum insurance amount, which is a clearly understood amount that cannot be subject to the whims of builders, markets, or anything else. £1m is £1m - simple as that!

 

[a twig]

Agreed value policies are a thing - it’s common in a lot of commercial insurance policies or classic car insurance but harder to find for domestic insurance, but a decent broker should be able to find you something

 

[a twig]

Worth a detailed look at any underinsurance Ts&Cs on the insurance policy. If for e.g you had declared a rebuild value of £200k then needed to make a claim, they send the loss adjuster out who decides actually you underinsured and the rebuild value was £400k, most policies will will then reduce your payout by the % difference (so in this example a 50% reduction so you would only get a max of £100k).

Insurance companies argue that they’ve missed out on premiums you would have paid if you had valued the house properly so you have broken the Ts&Cs where you promised to accurately value the house rebuild costs and thus they can pay out less

 

[TudorCottage]

Like so many other companies and industries, seems like insurance companies have just jumped on the greedflation bandwagon.

When I moved in here just over 3 years ago, Admiral’s rebuild policy was to reinstate the property (in a case of total loss) to its original condition using the correct materials with no cap on the pay out.

I would imagine a similar policy is not even available today unless your prepared to pay a ridiculously high premium.

 

[down-in-the-dumps]

I wake up to thoughtful posts. I'm late I had to get away to the gym , a walk and so on yesterday. But in the evening reading, it dawned on me that this was a scandal where underwriters and other associates (risk assessment people) are genuinely hoodwinking home owners seeking house rebuilding insurance. I enjoyed Flyfisher piece.

My take is that here in C. London during this particular time, costs are soaring into the aether, like all building materials and skills, food stuffs etc. and insurance policies of other risks be it health are going thru' the proverbial roof. The actuaries are putting wet fingers in the air and writing risk assessments accordingly. And the paperwork does not make it any easier to comprehend the intricacies or technicalities for policyholders of the value of service or risks.

To have a policy that says something like 'reinstatement as per the (original) build' but, then not being honoured is hypocrisy. Since we all now that these skills are constantly being used over the 4 decades here in London. So these types of policy are a sham. Should we all be taking squeezes of all our cornices etc. I repaired two rooms of mine 20 years ago. The policies all have a 1year break clause, and all the policies should be influenced by a 'recognised' metric such building material/ labour costs so that we can all see. The factor, house sales prices vary either with rising or deprecating values but building material and labour costs never drop.

A bit rushed...

I am still mulling this over w/ my better half.

 

[Kearn]

Not really sure what the goal is here, somewhat digressing from your original request which sounded like you actually needed genuine insurance recommendations, of which you got some.

It’s all well and good to bash an industry, and it’s not one I’m part of, but it gets to a point like this where it’s really unfounded option and made up statements and doesn’t hold much value.

Having recently insured a new project, first to live, then on an unoccupied restoration schedule, and almost insuring a liability project which we withdrew from, I’ve spent a lot of time discussing things with our broker, who is very knowledgeable and genuine. And ind ping so, understood quite a bit about the industry in the process.

What’s true, is that the cost of materials predominantly, and labour, plus all the other costs have shot up. Therefore the risk of rebuild costs has done the same. A period property used to be ballpark £2+k / sqm rebuild about 5 years ago, which over a few years quickly went to £4k, probably nearer £5k now. Even during the past 3 years on this project I’ve watched the cost of oak increase from first purchase to last.
Many of the insurers, not just in housing as it happens, are no longer sitting there and making money for nothing.

The reality is that in the last few years, many of the insurers have paid out more than they’ve taken in financially.

The realities of which when running a business hardly need explaining.

So yes, they’ve got more selective, tighter on risk profiling, more focussed on rebuild valuations, outsourced Flood:RE (which is the biggest issue to the industry since subsidence in the late 80s, due to new build farms and no surface water runoff), and as with the world they operate in, their costs have increased.

There are other assurances - Rebuild Cost Assessment is the recognised go to, and their figures have been fairly accurate on a few properties for me. If their number is undercooked if the worst happened, then they are liable for the shortfall. So in your elected underinsured example, the payout would not be affected as it would from the homeowner intentionally undervaluing.

As with most games, it’s about passing liability on. The insurers aren’t ‘sticking a finger in the air’ they’re moving the responsibility for the biggest threat to their finances to another body.

If you want insurance, as originally requested, then folks here will be helpful in recommending options that we’ve found to work. And others to avoid.
If you don’t, put the premiums in savings and hope you can eventually spend them on a holiday and not a rebuild.
There really isn’t a middle ground

 

[Flyfisher]

@Kearn - I get all of that and agree that assessing the risks involved in insuring property is a difficult business and subject to all manner of variables, probably even more so when a listed period property is involved.

But I'd argue that my proposal of insuring for up to a maximum amount does away with a lot of the valuation difficulty. Perhaps all of it. Why would the rebuild value matter if the policy has a maximum payout? It is then the policy holder who takes the risk of being under-insured. The insurer knows their maximum liability and sets the premium accordingly - why is the rebuild value important for this calculation?

@atwig "Insurance companies argue that they’ve missed out on premiums you would have paid if you had valued the house properly so you have broken the Ts&Cs where you promised to accurately value the house rebuild costs and thus they can pay out less" Yes ,it's a classic T&Cs issue that allows the insurer to wriggle out of things, something that everyone who has ever bought any form of insurance always worries about and it something that has blighted the insurance industry forever and given it such a bad reputation. They may argue that they have "missed out" on a higher premium but they set the premium for the risk of the agreed value, so their business model is not at any additional risk just because the property might require more for a rebuild. Again, why is the rebuild value needed at all to calculate the risk premium for a fixed maximum payout?

Surely, to subsequently reduce their payout in the event of a claim is tantamount to fraud because it means they have not paid out the amount for which the premium was quoted to cover. In other words, it is the policyholder who loses out because they've paid premiums to cover an amount that the insurer will not pay out.

And while I'm on my high horse ( ) how about the scandal of motor insurers only paying out accident claims up to the market value of the vehicle? Say I buy a new car and look after it with loving care and regular servicing so that after 10 years it is still in perfect working order. Being 10 years old, its market value is probably less than £1000. Someone then runs into the back of it and causes damage that will cost, say, £2000 to repair. The insurance company will only pay £1000, being the 'market value' of the car, leaving me £1000 out of pocket through no fault of my own, when what I really want is for my car to be restored to its original condition before the accident! OK, OK, I know, I need to calm down.

 

[down-in-the-dumps]

Kearn, thank you for honesty. Last year I went for the 1st time to Rebuild Cost Assessment and indeed they quoted my £2.1m. I now know that you have direct access to to your broker, would he cover a property like mine?

I'm muddling through an area of insurance that I have until last year not had to use before, and to values that I have not seen before. Our rate last year was £6,600 p/m2. In 2022 I was paying £1500 pa roughly on made-up values, so this is quite a shock to the system.

 

[fernicarry]

I've been on the wrong end of being uninsured. Unintentionally, spreadsheet sum missed some rows, on an international relocation. The loss was far less than the total insured but they still reduced the pay out by c.10%. Somehow it was worth someone's time to double-check my working out...

Don't get me started on motor insurers. They low-ball you on the value of your car (I'm not trading it in to you, I just want you to put it back the way it was or give me the funds to buy the same thing from a dealer), then gravely tell you how they *have* to use new parts from the manufacturer which are *very* expensive, on a 12 year old car with 90k miles on it... That corner of the industry really is a racket.

So far as home insurance is concerned you could try separating off buildings and contents into different policies. I'm happy to view buildings insurance as only for catastrophic events that make it uninhabitable so I'll put up with a high excess. We don't have a lot of valuable possessions, indeed if a burglar can find anything worth their while to cart off then fair play, so our needs for contents cover are disproportionate to that for buildings.

 

[Kearn]

I've been on the wrong end of being uninsured. Unintentionally, spreadsheet sum missed some rows, on an international relocation. The loss was far less than the total insured but they still reduced the pay out by c.10%. Somehow it was worth someone's time to double-check my working out...

Don't get me started on motor insurers. They low-ball you on the value of your car (I'm not trading it in to you, I just want you to put it back the way it was or give me the funds to buy the same thing from a dealer), then gravely tell you how they *have* to use new parts from the manufacturer which are *very* expensive, on a 12 year old car with 90k miles on it... That corner of the industry really is a racket.

So far as home insurance is concerned you could try separating off buildings and contents into different policies. I'm happy to view buildings insurance as only for catastrophic events that make it uninhabitable so I'll put up with a high excess. We don't have a lot of valuable possessions, indeed if a burglar can find anything worth their while to cart off then fair play, so our needs for contents cover are disproportionate to that for buildings.

And this is indeed a sensible option, especially as contents are pro rata increased every year, while I’m sure in reality the cost of our possessions decreases!

Also, as I think you’ve mentioned in a previous post, bump the XS up to max, reduce the premium, as we’re only really dealing with the absolute worse case if we were to claim…

 

[Kearn]

@Kearn - I get all of that and agree that assessing the risks involved in insuring property is a difficult business and subject to all manner of variables, probably even more so when a listed period property is involved.

But I'd argue that my proposal of insuring for up to a maximum amount does away with a lot of the valuation difficulty. Perhaps all of it. Why would the rebuild value matter if the policy has a maximum payout? It is then the policy holder who takes the risk of being under-insured. The insurer knows their maximum liability and sets the premium accordingly - why is the rebuild value important for this calculation?

I wasn’t disputing your suggestion in the slightest, I don’t think in principle it’s a terrible proposition, but I guess that’s just not the way the insurance model is currently built.