The sum insured is one of the most important figures on a landlord insurance policy.
It is also one of the easiest to overlook.
Many landlords focus on the premium, the insurer, the renewal date and whether the policy appears broadly similar to last year. But the buildings sum insured can have a major impact if there is a serious claim.
If the sum insured is too low, the landlord may be underinsured.
That can be a costly mistake.
What is the sum insured?
The buildings sum insured is the amount for which the property is insured for rebuilding purposes.
It is not the same as the market value of the property.
This is an important distinction.
The market value is what the property may sell for. The rebuild cost is what it may cost to reinstate the property if it is seriously damaged or destroyed. That can include materials, labour, professional fees, demolition, debris removal and other rebuilding costs.
A property may have a high market value but a lower rebuild cost. In other cases, the rebuild cost may be higher than a landlord expects, especially where labour, materials, access, age, construction type or location create additional costs.
That is why guessing can be dangerous.
Underinsurance can reduce a claim
If the sum insured is too low, the insurer may not pay the full amount expected.
In some cases, underinsurance can affect not only a total loss, but also partial claims.
For example, if the property should have been insured for a higher rebuild value, but the landlord insured it for less, the insurer may apply an adjustment to reflect the shortfall.
That can leave the landlord with a financial gap at exactly the wrong time.
The premium saving from using a lower figure may be small compared with the cost of being underinsured.
Renewal does not mean the figure is still right
A sum insured that was suitable several years ago may not be suitable today.
Rebuild costs can change. Labour costs can change. Materials can change. Inflation can affect construction. Property works, extensions, conversions or improvements may alter the figure. Older properties, unusual construction, flats, HMOs and mixed-use buildings may also need closer attention.
If the same sum insured has simply been carried forward from one renewal to the next, landlords should ask whether it has actually been reviewed.
A renewal notice does not prove the figure is correct.
It may simply repeat last year’s information.
Do not rely on market value
One common mistake is confusing market value with rebuild cost.
A landlord may know what the property is worth on the open market, but that does not automatically tell them what it would cost to rebuild.
For example, the market price may reflect location, rental demand, yield, local property values and investment appeal. Rebuild cost is about reinstatement.
Insurance needs the correct reinstatement figure.
If a landlord uses market value as a shortcut, the result may be inaccurate.
Property changes should trigger a review
Any change to the property should prompt landlords to think about the sum insured.
That may include:
- extensions;
- loft conversions;
- structural alterations;
- refurbishment;
- change of use;
- conversion to an HMO;
- adding additional bathrooms or kitchens;
- upgrading fixtures and fittings;
- changes to outbuildings or garages;
- works that increase reinstatement cost.
Even where the property has not changed, the cost of rebuilding may have changed.
That is why the figure should be reviewed periodically and not simply assumed to be correct.
Portfolio landlords face a wider risk
For portfolio landlords, sums insured become even more important.
A landlord with five, ten, fifteen or more properties may have multiple rebuild values across the portfolio. If several figures are outdated, the risk can multiply.
A single underinsured property is a problem.
A portfolio containing several underinsured properties can create a much larger exposure.
Portfolio landlords should not treat sums insured as routine figures. They should be checked as part of a proper insurance review.
Cheap premiums can hide low sums insured
A lower premium may look attractive, but landlords should check whether the sum insured has changed.
If a quote is cheaper because the rebuild value is lower, the landlord needs to understand whether that figure is actually appropriate.
A cheap policy based on an inadequate sum insured is not good value.
It may simply mean the landlord is paying less because the policy is not insuring enough.
Before accepting a lower quote, landlords should check whether the buildings sum insured is correct and comparable.
Your broker should be asking questions
A good broker should not simply carry forward figures without thought.
They should ask whether the property has changed, whether the current sum insured still appears suitable and whether a rebuild cost assessment may be appropriate.
They should also explain that the landlord is responsible for providing accurate information.
A broker who understands landlord property should know why this matters.
If your broker has not discussed sums insured with you before renewal, it may be worth asking whether your policy has been properly reviewed.
The claim stage is too late
The worst time to discover that a property is underinsured is after a major claim.
By then, the damage has happened. The cost of reinstatement is being assessed. The insurer is reviewing the policy. The landlord may already be facing loss of rent, disruption, repair delays and uncertainty.
At that stage, there may be little that can be done to correct an inadequate sum insured.
That is why the figure needs checking before renewal.
Why NetRent and Clear can help
NetRent has worked with landlords for 23 years. We understand rental property and the risks landlords need to consider before renewing insurance.
Sums insured are a key part of that review.
NetRent speaks to landlords directly, asks relevant landlord-specific questions and helps ensure the information passed to Clear’s dedicated NetRent insurance team is properly considered.
Clear Insurance Management then use their specialist broking expertise to seek suitable landlord insurance options.
Importantly, Clear do not simply roll landlord policies forward at renewal. They re-broke landlord insurance to help ensure landlords are getting the best available price and policy for their circumstances.
That renewal process matters because cover should be reviewed properly, not simply repeated.
Do not guess the figure
Landlords should not guess their rebuild cost.
They should not assume market value is the same thing.
They should not assume last year’s figure is still right.
And they should not accept a cheaper quote without checking whether the sum insured is appropriate.
The sum insured may seem like just another number on a policy schedule, but in a serious claim it can become one of the most important figures in the entire insurance arrangement.
Contact NetRent before you renew
If your landlord insurance renewal is approaching, check the buildings sum insured before you commit.
Send your renewal to NetRent.
Let us review what you have been offered. Let us ask the right landlord-specific questions. Let us see whether Clear’s dedicated NetRent team can provide a competitive alternative that properly reflects your property or portfolio.
You may save money. You may improve your cover. You may avoid a costly underinsurance problem.
But most importantly, you will not be renewing on assumptions.
Call NetRent: 01352 721300
Email: insurance@netrent.co.uk
Before you renew, check whether your sums insured are still accurate. Send your landlord insurance renewal to NetRent.