The sum insured is the most important number on the policy: it is the ceiling up to which the insurer stands behind the building. Set well, the building can get back on its feet even after the worst; set badly, even the best policy terms are worth little. The good news: sizing is not an art but a method – it can be broken down into steps and kept up to date.
- The sum insured is based on the rebuild value – not on the market price and not on the “usual” rounded figure.
- The base data for sizing: accurate areas, structure, fittings, building systems, extras (lift, solar panels) – and the incidental costs.
- “Rounding down” is the most expensive way to save on the premium: underinsurance hits back when a claim comes, in the form of proportional settlement.
First step: the real base data
Everything starts with accurate data: the floor area to be insured (flats, common areas, cellars and lofts under their own rules), the type of structure, the year of construction and the major refurbishments, the building systems and the extras – lift, solar panels, entry systems. The most common mistake here is “inherited data”: an area and a list of fittings recorded ten years ago carry themselves forward, while the building has been extended and modernised since. There is a ready-made list for collecting the data: the survey data list.
Second step: the rebuild logic
The amount has to cover the full cost of rebuilding – alongside materials and labour, also design, permits, demolition and clearing the debris, within the framework set by the policy terms. This is why the market price is a poor guide: the article on the difference shows why it errs in both directions. Insurers use their own methodology and unit figures for sizing – the building's job is to provide good base data, and comparing the methodologies is part of comparing the quotes.
Third step: the sub-amounts and limits
Beyond the main sum, quotes also carry sub-limits: glass breakage, vandalism and liability claims may have ceilings of their own. Sizing extends to these as well: the liability limit, for instance, should follow the real risk rather than the premium – where personal injury is involved, the stakes are high. On the role of limits: when a quote is cheap and when it is expensive.
Fourth step: maintenance
A well-set amount does not stay right forever: construction costs move, and the building changes. Two tools keep it at the right level: indexation at the renewal date, and raising the sum mid-term when something bigger changes – a refurbishment, an extension, solar panels. In the manager's annual quarter-of-an-hour routine, this is the first item.
When should the building ask for help?
When the base data is uncertain, when the building is unusual (listed status, mixed functions), after a major refurbishment, or when nobody can say where the current sum insured came from. In such cases a survey – and a valuation where needed – costs less than getting it wrong, and a quote request is a good occasion for it anyway, because when we go out for competing quotes we also put the methodologies behind the sums side by side.
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