What is the difference between Declared and Market Value?
One of the most frequent questions I am asked when dealing with Let Property Insurance is
‘what is the difference between Declared and Market Value?’
A common misconception is that the Declared Value and Market Value are the same, this is understandable as the phrase can be a bit misleading.
Many clients understandably struggle with the jargon used in their insurance policies, it is often not entirely clear, which can be incredibly frustrating when reading through your documents.
At Brownhill, we feel it is important that everyone understands the terminology used to ensure you know exactly what you are covered for and what information you need to provide.
The Declared Value
The Declared Value is the amount you ‘declare’ to the insurer of how much it would cost to rebuild your
property from scratch, including professional fees and debris removal.
The most important things to remember about the Declared Value is that this needs to be an accurate
reflection of the rebuilding cost of your property.
To ensure you are covered correctly, and avoid claim disasters, we recommend you obtain this figure
from a professional building surveyor.
We have teamed up with rebuildcostassessment.com who also work with a number of major insurers. For £150 including VAT they will provide a comprehensive report for your property; including the current reinstatement value for insurance purposes.
The cost of rebuilding should also include the cost of debris removal and professional fees from
Architects. Be wary of online tools as they sometimes do not show this information.
Rebuildcostassessment.com is regulated by the Royal Institute of Chartered Surveyors so you can be
assured of a quality service. All valuations are undertaken from desktops so are Covid secure.
Please also be aware that many mortgage providers will stipulate that a property is insured for a
minimum amount; you need to ensure you are complying with this condition.
The Market Value
The Market Value is the amount your property would cost if you were to put it up for sale.
Most standard Property Owner Insurance Policies do not require the market value as the policy will be
based on the rebuild cost. These are often very different amounts!
There are too many variables when it comes to the market value, for example, the location of the
property. House prices differ from area to area, as do the rebuilding costs, depending on location and
the cost of local labour.
Other key terms:
Day One Uplift: An additional cover many commercial insurers include automatically which
allows for a sudden increase in inflation mid-term up to a certain percentage of the Declared
Sums Insured: The total of the Declared Value with the uplift percentage applied.
Average Clause: A condition applied to many Property insurances which states that if you
underinsure your property, any claims settlement could be proportionately reduced by the
the percentage you are underinsured. This condition can cause several hardships in the event of a
claim, hence the need to ensure that you correctly declare the rebuilding cost or declared value
of your property.
Most insurers will amend your Declared Value each year in line with the RICS rebuilding cost inflation
rate, this is generally referred to as Index Linking. Whilst this keeps you up to date with inflation, you
also need to consider any capital expenditure during the year, such as the cost of building an extension.
As your broker, we are here to help with any questions you have and can always assist in explaining the
jargon insurers use.
Please do not hesitate to contact Brownhill Insurance on 0208 353 8952; any of our staff will be happy
to assist you.