Insurers index link sums insured to keep pace with rising costs. Although policyholders only see their sums insured increase when the renewal documents are issued, most policies are index linked on a monthly basis, which could have a bearing on claims. Index linked adjustments continue from the date of a claim to the settlement, provided there has not been an unreasonable delay in notifying the insurer of the claim.
The buildings sum insured is index linked with the House Building Cost Index and the contents sum is connected to the Retail Price Index. No charge is made by insurers for index linking, but as premiums are charged on the sums insured, as the figures go up the premium goes up as a consequence. Generally specified personal possessions, such as jewellery and watches are not index linked. Set policy limits and cover extensions, such as personal money and cards are also exempt from the increase. In the event that the Buildings and Retail price indexes record a minus the sums insured would stay the same.