Can you be overinsured? Why inflated sums insured can cost more than they should

The conversation around rebuild costs often focuses on underinsurance, but overinsurance can also create unnecessary costs. In 2026, FCA fair-value scrutiny remains relevant, so materially inflated sums insured may need to be clearly justified.

“Overinsurance is often overlooked because it sounds safer than being underinsured,” said Sharon Masters AIIRSM MARLA TechCIOB, Technical Lead and Surveyor at RebuildCostASSESSMENT.com. “But in practice, it means a client could be paying more than necessary for no extra protection.”

RCA’s own analysis shows that overinsurance can become more prominent in higher sums insured bands. This reinforces a key point: increasing cover is not the same as improving accuracy.

What the sum insured should reflect

Buildings insurance should reflect the cost of repairing or rebuilding the property, with the sum insured acting as the maximum amount the insurer will pay. If that figure is higher than the true rebuild cost, the policyholder may be paying for cover they do not need. For larger property portfolios, even small percentage inaccuracies can add up to high and unnecessary costs.

Overinsurance can arise when sums insured are based on outdated figures, broad assumptions, market value, or generic cost estimates rather than a property-specific rebuild cost. Index-linking can also preserve an error if the starting figure was wrong, because each uplift is applied to the existing sum insured.

Under the FCA’s Consumer Duty and product-governance expectations, firms should be able to show that the price paid is reasonable in relation to the benefits received. Where sums insured are materially inflated, the basis for that figure should be clear.

The role of evidence-led accuracy to avoid overinsurance

A professional Rebuild Cost Assessment provides a more reliable and defensible reinstatement-cost figure, especially where the property is complex, non-standard, high-value, or has changed over time. When brokers use this information, they have a clearer basis for advice conversations, renewal decisions, and fair-value evidence where FCA rules apply.

“Fair value goes both ways,” Sharon added. “It’s about avoiding shortfalls while showing that the sum insured reflects the true rebuild cost.”

For property owners, the message is simple: overinsurance does not usually mean better protection. It can simply mean unnecessary cost. Property-specific RCA data helps reduce reliance on assumptions and supports evidence-led conversations around fair treatment and fair value.

As advice, pricing and renewal discussions become more evidence-led, the priority is clear: accuracy matters at both ends.

For brokers reviewing sums insured at renewal, the practical next step is to check when the last RCA was completed, whether the property has changed, and whether the current figure remains evidence-based.

Avoid overinsurance: get a rebuild cost assessment