This post looks into how insurers might deal with a buildings and contents claim. The general purpose of a home insurance is to put the claimant back to the same positive they were in immediately before the loss or damage, provided that the sum insured is not less than the current replacement cost of the buildings and the home is in a good state of repair. Then the insurer will choose to pay the cost of repair or replacement. If replacement is required, then the insurer will rebuild in the same style, condition when the original building was new, including agreed additional costs, such as professional fees and any local authority requirements. If the buildings is not in good condition then the insurer will have the option to (taken from a standard home insurance policy wording):
1) the cost of repair or replacement less a reduction for wear and depreciation or
2) for reduction in market value caused by the damage.
The maximum amount payable in respect of each claim is the sum insured stated in the schedule, plus 25% of the Buildings sum insured for loss of rent and cost of temporary accommodation, if the home is declared uninhabitable by the insurer as a result of the insured damage.
The contents sum insured will not be reduced following payment of a claim. Provided that at the time of damage or loss the sum insured is not less than the full current replacement cost, the insurers will have the option to settle as follows:
1) replace the item(s) as new or
2) pay the cost of repair for items which can be economically repaired or
3) pay the full replacement cost.
The full replacement cost is the cost of replacing all contents as new, less an amount for wear, tear and depreciation on clothing and household linen. Where the policyholder has chosen not to repair or replace an item, the insurer will make a deduction for wear, tear and depreciation. The maximum payable shall not exceed the sum insured.