A large Sum Insured can create a false sense of security, and for complex properties, that is often where the biggest gaps hide.
A Rebuild Valuation on one high-value property found that the retaining walls alone were worth significantly more than the policy limit. The property was valuable and the cover was substantial, but it still wasn’t adequate. Fortunately, the gap was found before a claim, not during one.
A client with a multi-million dollar home and a multi-million dollar policy is rarely the one you worry about. It is easy to make the assumption that the numbers are big enough to be right, but that assumption is exactly what deserves the most scrutiny, so it is worth challenging.
Underinsurance happens in the high-value market just as readily as anywhere else, and sometimes the size of the number is what stops anyone from questioning it. A high Sum Insured is not necessarily the right Sum Insured.
Part of the problem is that clients still anchor their cover to what the property is worth. Market Value is driven by land, location and outlook while Rebuild Cost is driven by labour, materials, fuel, access and construction. If the property market softens, Rebuild Costs don’t always follow.
Retaining walls are just one example of how high-value homes widen that gap. The features that make a property valuable are often what make it complex to rebuild. These homes may have restricted access, natural stone, custom kitchens and bespoke detailing.
These clients often know exactly what they paid for their kitchen or their stonework. What they rarely know is what it would cost to replace today.
The Sum Insured is ultimately the client’s responsibility, but getting it right is genuinely hard. Every adviser who sees a purchase, a renovation or a change in how a property is used is in a position to ask whether the cover has kept up. And for these properties, price shouldn’t lead that conversation. The quality of the cover matters as much as the premium.
The question worth asking every high-value client: When was the Rebuild Cost last professionally assessed?
