Paying it safe...

Leptospermum scoparium also known as Snow White Tea Tree. An evergreen shrub with small white flowers.

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More than 85 per cent of properties in a survey have been found to be significantly underinsured, which has led a lettings specialist to warn landlords and homeowners about the risks they face.

The problem, say the experts, is many homes aren’t insured to their full reinstatement value and that can lead to a lot of cost and headaches.

While it’s tempting to make savings, it’s important to research the situation thoroughly and make sure you’re covered to the proper value.

Lettings agent Leaders has issued the 
warnings following the research carried out on behalf of Aviva Insurance.

Hepburns Insurance Services Ltd business development manager, Charles Foster works closely with Leaders. He says: ‘If you are found to be underinsured, most insurers will apply ‘average’ allowing them to reduce any payments. This applies to all homeowners, whether they are a landlord letting out the property or an owner-occupier.

‘For example, if a flood or fire caused £75,000 of partial damage and the property is insured for £200,000, but its true reinstatement is £300,000, this would equate to being one third underinsured. Applying average this one third will be taken off your claim and the insurer would then pay out a maximum of £50,000.

‘This would leave the property owner with an underinsurance shortfall of £25,000.

‘The current economic climate has led to reductions in the market values of some buy to let properties. While property owners may be looking for savings during these times, it is important that this is not at the expense of insurance cover.’

Leaders advise that generally property sums insured should represent the cost of reinstatement to the existing specification. Ancillary costs should be considered, for example sums should make allowance for items such as demolition, debris removal and professional fees, as required.

Particular buildings may also require additional costs to be incurred, such as compliance with public authorities regulations, for example, listed buildings or buildings containing asbestos material necessitating removal.

For guidance on rebuilding costs there is no substitute for the advice of a qualified surveyor. However, you can check the adequacy of your existing sums insured by

‘In addition,’ says Charles, ‘while making sure you have adequately insured your buildings it is also as important to remember that when you’re letting your property to tenants a standard home insurance policy will often exclude let properties. For this reason a specialist landlord insurance – which includes landlord liability cover – is vital if you own a rental property. Leaders in partnership with Hepburns have designed a specialist landlord policy.