The overlooked risk of overinsurance in HNW property

In high-net-worth (HNW) property insurance, underinsurance has long been a concern. And rightly so – with 70% of UK properties insured for less than they should be. However, overinsurance is increasingly drawing attention. Many premium homes are insured for more than their true rebuild cost. This means HNW property owners are paying more than they need to for their insurance, while brokers face potential challenges in evidencing fair value under the FCA’s Consumer Duty.

“A validation that’s too high may feel safer than one that’s too low, but both ultimately disadvantage the property owner,” said Matthew Ward, Senior Surveyor at RebuildCostASSESSMENT.com. “Overinsurance increases premiums unnecessarily, complicates fair-value compliance, and can undermine long-term trust between client and broker.”

It's all about rebuild cost

Overinsurance often arises when market value or broad construction cost estimates are used to set the sum insured, rather than a true rebuild cost. HNW homes can be complex to assess, and assumptions can easily inflate sums insured. In some cases, build costs provided by architects are used in place of insurance-specific rebuild values, despite differing scopes, allowances, and exclusions.

The FCA’s fair-value rules now make this issue more than academic. Brokers and insurers must evidence that customers receive proportionate cover for the price paid. An inflated sum insured may raise questions during audits and, in some cases, may lead to remediation activity if clients are deemed to have overpaid.

Regular checks are needed

Accurate Reinstatement Cost Assessments (RCAs) are therefore essential for HNW clients. A professionally conducted RCA considers materials, craftsmanship, heritage requirements, and modern reinstatement costs – without distortion from market values or speculation. Crucially, it provides a transparent audit trail, helping brokers evidence fair value and regulatory compliance.

“High value doesn’t mean high guesswork,” Matthew Ward commented. “Today’s data tools and cost indices allow precise, justifiable calculations, even for unique properties.”

For insurers and brokers, promoting regular RCAs for HNW portfolios protects both customer outcomes and regulatory confidence. For clients, it means peace of mind that they’re neither under-insured or over-charged.

Ultimately, the most effective validation isn’t the highest – it’s the most accurate.