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What insurance do I need?

The building itself is insured against most risks - such as flood and fire for the cost or repair or rebuilding. Even risks such as terrorism or subsidence can normally be purchased as optional extras for added security from most insurers.

When you declare the value of your property you are actually estimating the cost of rebuilding it should it be totally destroyed (this is what insurance companies call a total loss).

Most insurance companies work out a rate to charge the landlord based on the location of the property and then apply it to the amount specified to rebuild the building (which is called the Buildings Sum Insured).

It is therefore cheaper to insure a building that is worth less than an expensive building which is as expected.

It is equally important to make sure that you do not underestimate the cost of rebuilding your property. If you have paid a lower premium by underestimating the Buildings Sum Insured, then the insurer will normally only pay your claims up to the proportion of the building that you have insured.

For example: If your house is worth £100,000 but you only declare a Buildings Sum Insured of £60,000. should you have a claim of £10,000 then the insurer will only pay you £6,000, as they will deem that you under-insured. It is important not to be caught out by this by being tempted by lower premiums for lower Buildings Sum Insured.

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