Underinsurance has become one of the most significant issues facing UK landlords—and one of the most expensive. Rising construction costs, supply chain pressures, labour shortages, and evolving building regulations have combined to push rebuild costs far above many landlords’ current sums insured.

The result?
Millions of pounds in avoidable penalties, reduced claims settlements, and financial exposure—particularly for landlords who haven’t reviewed their rebuild values in several years.

As we look ahead to 2026, insurers are preparing to tighten their approach to underinsurance even further. Many will be auditing sums insured more aggressively, applying proportionate settlement clauses more strictly, and requiring landlords to demonstrate how their rebuild values were calculated.

On Day 11 of our 20-day series, we break down how underinsurance works, why it matters, how to fix it, and how NetRent and Clear Insurance Management help landlords bring their sums insured up to accurate, defensible levels before 2026 renewal season.

Why Underinsurance Is Such a Serious Issue

Underinsurance happens when the cost of rebuilding a property is higher than the sum insured stated on the policy. With construction inflation rising sharply in recent years, this is now extremely common.

If a landlord is underinsured—even by a small percentage—insurers may apply the “average clause”, also known as proportionate settlement.

Example:

If a rebuild cost should be £200,000 but the property is insured for £150,000:

• The property is underinsured by 25%.

• Any claim may be reduced by 25%—even if the claim is far smaller than the full rebuild.

This means a £20,000 claim might result in a payout of just £15,000.

As we move into 2026, insurers are expected to apply this calculation with zero tolerance for inaccurate sums insured.

Why Underinsurance Will Matter Even More in 2026

Insurers are preparing to:

• scrutinise rebuild values more rigorously

• request documented justification for sums insured

• decline risks with obviously underestimated valuations

• require professional assessments for certain property types

• increase premiums where rebuilds are not kept up to date

• enforce proportionate settlement clauses consistently

Landlords who fail to update sums insured now may face:

• reduced claims settlements

• tougher policy conditions

• increased excesses

• higher premiums

• difficulty securing insurer appetite

• slowed or disputed claims

Getting sums insured right today is essential for strong negotiating power in 2026.

What Determines a Correct Rebuild Cost?

The rebuild cost is not the market value of the property.
It is the cost to reconstruct the building from scratch after a total loss—including:

• demolition

• debris removal

• materials

• labour

• professional fees

• compliance with current building regulations

• VAT (in many cases)

• specialised construction methods

• heritage or listed building considerations

Many landlords underestimate these factors or rely on outdated assumptions.

How Rebuild Values Become Outdated

NetRent sees the same issues again and again:

1. Inflation not reflected in sums insured

Index-linking helps—but it does not correct an already undervalued rebuild figure.

2. Renovations increase rebuild cost

Extensions, loft conversions, new kitchens/bathrooms—none of these increase market value only; they increase the rebuild cost.

3. Using purchase price as a proxy

Market price has little relation to rebuild cost.

4. Using generic online calculators

These can be helpful but often lack detail for complex or older buildings.

5. Portfolio landlords using “copy and paste” figures

A common error that amplifies risk across multiple properties.

How NetRent & Clear Help Landlords Fix Underinsurance Before 2026

Our joint approach ensures landlords are fully prepared for the more demanding insurance environment ahead:

✔ Review of existing sums insured

✔ Guidance on rebuild cost assessment options

✔ Access to professional rebuilding valuation services

✔ Support using RICS-backed tools where appropriate

✔ Identification of properties most at risk

✔ Preparing accurate documentation for underwriters

✔ Ensuring sums insured reflect true reinstatement costs

This not only protects you during a claim—it strengthens your negotiating position for 2026 renewals.

The Benefits of Getting Sums Insured Right Before 2026

Landlords who take this seriously now will enjoy:

Better cover certainty

Avoiding reduced payouts and disputes.

Improved insurer confidence

Accurate sums insured signal responsible risk management.

Stronger negotiating position

Underwriters reward high-quality data with better terms.

Fewer conditions and exclusions

Accurate valuations reduce the insurer’s perceived risk.

Long-term pricing stability

A cleaner risk profile leads to better renewal outcomes in 2026 and beyond.

Ending Underinsurance for Good

Underinsurance is not inevitable; it is preventable.
But it requires proactive updates—not assumptions.

By addressing rebuild values now, landlords protect themselves from:

• reduced settlements

• stalled claims

• restricted renewals

• higher premiums

• insurer rejections

This is one of the most important steps any landlord can take to prepare for the insurance landscape of 2026.

Contact NetRent

If you want help reviewing or updating your sums insured:

Telephone: 01352 721300
Email: support@netrent.co.uk