Firstly, always remember that the amount you insure your building for has nothing to do with its value or purchase price.
The SUM INSURED is the amount of money it will cost to rebuild - or reinstate the property. It is called a Reinstatement Cost valuation or report.
This amount depends on the size of your building, its construction, style, quality, condition and location, as well as many other variables. Property in Central London is more expensive to rebuild than a similar building in Harrow or High Wycombe, three of the areas we cover.
If you are over insured, you are paying a premium unnecessarily. We have recently calculated a block of flats that was insured for £1.8 million need only be covered for £900,000. Indexing on automatic renewals year after year had totally exaggerated the amount they needed to be insured for.
For a house of normal construction, free calculators are available online. These are not suitable for blocks of flats or commercial property. Woodward Chartered Surveyors pay substantial sums to use special BCIS software, approved by the RICS to help calculate Reinstatement Costs, and Chartered Surveyors trained in making these calculations for you.
Remember, if you insure a building for less than it's full Reinstatement Cost, not only are you exposed in the event of substantial damage, but even a smaller claim may only pay out a percentage of the cost to repair damage. If you are a Director of a management company, you could be personally liable for the balance. That is why we recommend blocks of flats have Reinstatement Cost reports carried our every 5 to 10 years.