When making home insurance claims, many homeowners are shocked to discover that their policy doesn’t cover the full cost of repairs. This is often due to underinsurance - a common but avoidable issue that can significantly reduce your settlement, especially during a fire damage claim or major water loss.
At All Property Claims, we regularly support homeowners who only uncover underinsurance once it’s too late. This guide explains how underinsurance happens, how to avoid it, and how to protect yourself before making a fire insurance claim or any other property claim.
What Is Underinsurance and Why Does It Matter?
Underinsurance occurs when the sum insured on your policy is lower than the true cost to rebuild your home. This matters because insurers often apply the “average clause”, meaning:
- If your property is insured for 70% of its true rebuild cost, your claim payout may be reduced by 30%
- This applies even if the damage is only partial, such as a kitchen fire or a single-room escape of water
According to industry data, the majority of UK homes are underinsured.
Rebuild Cost vs Market Value: A Costly Misunderstanding
One of the most common mistakes homeowners make is confusing market value with rebuild cost.
- Market value includes land, location, and demand
- Rebuild cost is the expense of demolishing, clearing, and reconstructing the property to its original standard
Rebuild costs must also account for:
- Professional fees (architects, surveyors, engineers)
- Compliance with current building regulations
- Increased material and labour costs
- Site clearance and waste removal
This is why relying on purchase price or estate agent estimates can leave you dangerously exposed.
How the BCIS Rebuild Calculator Helps
The British Cost Information Service (BCIS) rebuild calculator is the industry-recognised tool used by insurers, surveyors, and claims professionals. It helps homeowners:
- Accurately estimate rebuild costs based on property size, type, and location
- Avoid guesswork when setting their sum insured
- Reduce the risk of underinsurance during major claims
Many homeowners assume their insurer calculates this automatically, but in most cases, the responsibility rests with you.
Underinsurance During a Fire Damage Claim
A fire insurance claim is one of the most financially significant claims you can make. Fire damage often requires:
- Full strip-out of affected areas
- Structural repairs
- Smoke and soot decontamination
- Complete reinstatement, not just cosmetic repairs
If your property is underinsured, insurers may reduce payouts even when liability is accepted. This can leave homeowners funding repairs themselves at an already stressful time.
Because we manage both the claim and the reinstatement works, our focus is always on restoring your home properly - not cutting corners to fit reduced payouts.
Speak to Our Experts Before You Claim
If you’re unsure whether your home is correctly insured, or you’re facing a fire damage claim and are concerned about underinsurance, expert guidance can make all the difference.
Our experienced team is available 24/7 to review your situation, explain your entitlements, and manage your claim from start to finish, with no fees if we handle your repairs. Contact All Property Claims today.