Fingers burnt on shortfall in cover

A READER suffered a devastating blow when his catering business burnt to the ground.

But at least his insurance would cover the cost of rebuilding his premise, right? Err, no.

Edward’s deeply concerning plight is about a commercial building but his case applies equally to residential homes.

His problems started in January when his premise was completely destroyed by fire.

But Edward felt he could get himself back on his feet because the insurance money would provide the funds to rebuild.

Pressured

All seemed fine until he obtained quotes for the rebuild and discovered the lowest quote was nearly £80,000 more than the rebuild cost stated on the insurance policy.

You can guess what happened next. The insurer said they would only cover the amount as stated in the policy, meaning that Edward, of Doncaster, South Yorkshire, is now £80,000 short.

I have advised him to take his case to the Financial Ombudsman service, although they may be less sympathetic with him than they would if he took the same claim as a consumer in relation to a private property. UNDERINSURING A PRIVATE PROPERTY Edward’s case highlights the importance of considering carefully the question: “What is the rebuild cost of your property.”

This needs to be foremost on your mind when taking out home buildings insurance.

The average consumer is not an expert at valuation so they should never feel pressured by insurers to simply pluck a figure out of the air.

My advice is that you should always ask the insurer how to do the valuation then follow that advice to the letter. You should also make sure that this advice is put in writing to you.

That means you have it as evidence should it turn out later that you are underinsured.

The good news for home owners is that the Financial Ombudsman look at underinsured cases closely and explore exactly what the insurer told the home owner.

This can end in a positive result for the insured.