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The problem with index-linking

Updated: May 3

Dave has a lovely house, which he insured for £542,000 in 2013. Should he be confident that index-linking has kept him protected from under or over-insurance ever since?

View our latest animation and find out why index-linking is a good thing, but with a bit of a problem.

Video Transcript

Meet Dave. Dave has a lovely house. He insured it in 2013 for £542,000, confident this was right, because he has a friend who’s a Chartered Surveyor.

Anyway, Dave’s house is now insured for more than that because his insurance is index-linked. This means the amount his house is covered for goes up a bit every year because as we know… things go up every year!

But should Dave still be confident his house is covered for the right amount?

Well that depends on two things:

One, whether his friend the Chartered Surveyor was right, and

Two, whether index-linking actually works?

Now let’s be clear, we think index linking is a very good thing, because it’s an extra layer of protection from under or over-insurance. But there is a slight problem, in that it’s based on “an average of house types.”

And let me tell you, Dave is not an average type of guy!

Maybe Dave needs to check again?

RICS, whose BCIS calculation sits behind most index-linking of buildings sum insured, says index-linking…

“Cannot exactly reflect changes in all rates from the house rebuilding cost tables as regional trends, labour and materials contents differ” and it recommends “rebuilding cost is checked regularly, at least every 3 years.”

So there you have it. Index linking can help, but to feel confident you’re insured for the right amount your building should be reviewed regularly and professionally.


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