When Barry claimed on his buildings insurance after water damage, a loss adjuster discovered a problem with his rebuild cost estimate.
What happened
Barry took out buildings insurance for his home. Six months later, an escape of water caused damage to several rooms, and he made a claim. His insurer sent a loss adjuster to inspect the damage.
The insurer agreed to cover the claim but pointed out that the property was underinsured. Barry had said the rebuild cost would be £400,000, but the loss adjuster said it would be more like £800,000.
Because of this, the insurer applied the average clause and settled the claim at 50% of full value – aligned with how much Barry was underinsured.
Barry thought this was unfair and he complained. He said he’d worked out the cost based on how much his neighbour had paid for their house the year before. He thought this was an accurate valuation.
His insurer disagreed and sent him a final response confirming it would still be applying the average clause. Unhappy with this, Barry contacted us.
What we said
When Barry took out his insurance, he was asked, ‘What would it cost to rebuild your property in full, including demolition and debris removal?’ His insurer’s website linked him to an online calculator he could use to get an accurate estimate. If he’d used this tool, the estimate would’ve been between £700,000 and £800,000.
When we asked how he got his £400,000 estimate, Barry said he wasn’t very good with computers and hadn’t used the online calculator. He’d spoken to his neighbour recently about how much their house had cost. He thought this would be about the same as the rebuild cost of his own property.
We felt the insurer’s question had been clear and guidance had been provided. We didn’t think Barry’s estimate seemed reasonable and agreed that he was underinsured.
The insurer said it would have charged £700 rather than £600 for the policy if it had been given a reasonable estimate. We decided the insurer shouldn’t reduce the settlement based on the 50% underinsurance. Instead, we thought it was fair for the insurer to base it on the premium amount, paying out 85% of the total claim value.