The Risk of Underinsurance in Property Insurance

As a property owner—whether it’s a residential home, commercial unit, or a multi-property portfolio—you likely believe your building insurance has you covered. But if your cover is based on outdated or inaccurate rebuild costs, you could be underinsured—and that’s a serious risk.

At Activate Insurance Brokers, we’re here to ensure you have the right protection in place. We provide access to rebuilding cost assessments and offer tailored advice to help our clients stay fully covered, not just competitively priced.

What Is Underinsurance?

Underinsurance happens when your building is insured for less than the amount it would actually cost to rebuild it from scratch after a major loss—such as a fire, flood, or structural damage.

This rebuild value includes:

• Materials
• Labour
• Professional fees (architects, surveyors)
• Debris clearance
• Compliance upgrades (e.g. planning regulations)

Importantly, it’s not the market value or resale value of the property—it’s often very different.

The Average Clause: What You Could Lose

Most property insurance policies include an “average clause”, which allows insurers to reduce your claim payout proportionally if they find your property is underinsured.

Example:

• Rebuild cost: £1,000,000
• Sum insured: £750,000 (25% underinsured)
• Claim amount: £100,000
• Insurer payout: £75,000 (25% reduction)

That’s £25,000 straight out of your pocket—just because of an incorrect rebuild valuation.

Why Underinsurance Happens

Some of the most common causes of underinsurance include:

• Outdated valuations from previous years
• Inflation and rising building costs
• Home extensions or renovations not declared to your insurer
• Confusing market value with rebuild cost
• Lack of professional advice or valuation

How We Help: Accurate Rebuilding Cost Assessments

At Activate Insurance Brokers, we do more than find policies—we make sure the cover is fit for purpose.

Here’s how we support our property owner clients:

Rebuilding Cost Valuations

We arrange access to RICS-compliant building surveyors and valuation professionals to ensure your property’s sum insured is accurate and regularly updated.

Ongoing Policy Reviews

We keep your cover in line with your real-world risks. If your property changes—through refurbishment, new tenants, or alterations—we’re on hand to adjust your cover accordingly.

As an independent insurance broker, we’re not tied to any single insurer. That means you get clear, unbiased guidance based on your specific needs—not what’s easiest to sell.

Why It Matters

Being correctly insured means:

• You’re protected when you need it most
• Your claims are honoured in full
• You avoid costly out-of-pocket expenses
• You stay compliant with lender or landlord obligations

Avoiding underinsurance is not just smart—it’s essential.  

Let’s make sure your property insurance works when you need it most