Making Sure Your ‘Sums Insured’ Are Right

Getting the ‘sums insured’ figure right when you are evaluating any buildings or contents insurance policy is very important. This is because you need to make sure that you’re not underinsured.

The Danger of Underinsurance

Finding yourself underinsured can be a real problem. If you are only insured for part of the actual current value of replacing your entire home, this will lead to expenses falling on you if you need to rebuild/replace it.

It can also mean that smaller claims are affected. If it is found that you are underinsured, then an average clause can be applied. This means that you are expected to cover part of the cost of any claim on your insurance. If, for example, you are covered for £200,000 but the current cost, with inflation, of replacing the building is £400,000, then you are obviously only covered for 50% of the rebuild cost. This may then mean that you will also only be covered for 50% of all your claims on your buildings insurance. This makes sense because if you had given the right value to be insured, your premiums may well have been higher.

What is Buildings Declared Value and how is it different from sums insured?

You may in practice, encounter two terms within an insurance policy, which it can help you to properly understand before you make a decision to sign up to a policy. These are: ‘sums insured’ and ‘Buildings Declared Value’ (BDV). The difference between the two figures is simply an indication of how your insurer handles inflation during the period of cover.

For instance, if your BDV on day one of your cover is £200,000 and you suffer a total loss on that day, then you will be covered for £200,000 to clear the site and replace your building. However, especially in these times of rising inflation, you will be aware that the cost of replacing your building following a total loss is going to increase over time. If your sum insured is index linked it will rise with the costs of the materials and labour needed to replace your building following a total loss.

Blanket Sums Insured

In order to solve the problems of accurate valuation and avoid unnecessary complications for you, at Park Home Assist we use a ‘blanket sums insured’ figure instead.

You may find a replacement value for your park home tricky to come up with, particularly if you have bought it through the management of the park it is situated on. A ‘new for old’ valuation can also be difficult to come up with as the value of brand-new park homes is a moving target. This is not just because of inflation, but also because of changes in building standards, techniques and material costs.

At Park Home Assist, we are aware of the problems of accurate valuation and so our park home insurance policy provides you with up to £500,000 cover for your park home (excluding its contents). Our policy also provides cover for site clearance, transportation and re-siting of your replacement home as standard. Our many years of experience tells us that this figure is almost always entirely adequate.

You may also find it very difficult to come up with a truly accurate summation of the value of your contents, particularly if you have a ‘new for old’ policy. Short of maintaining a rolling account of everything in every room of your park home, the danger of finding yourself underinsured is a real one. At Park Home Assist, we provide insurance for up to £60,000 in contents with additional options to increase that sum or itemise individual items with high value. 

While these figures may seem excessive to some, our premiums remain very competitive, and the hassle-free peace of mind our cover provides is something our customers value and that we are proud of.

If you have any questions about your policy or about what exactly are the sums insured under your policy,  please call us on 01604 946 796 and one of our award-winning team will be happy to help you.

Please note that all park home insurance cover is subject to acceptance of terms and conditions.

This is a marketing article from Park Home Assist, multi award-winning providers of residential park home insurance.  If you would like to speak to an advisor regarding insurance for your park home, please contact our friendly team in our Northampton office on 01604 946 796.

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Published – 02/09/2022