HNW Property: Overinsurance Can Be an Issue

The latest from Rebuild Cost Assessment for you;

In high-net-worth (HNW) property insurance, underinsurance has long been a concern, with 70% of UK properties insured for less than they should be, according to a recent survey. However, overinsurance is drawing increasing attention as many premium homes are insured for more than their true rebuild cost.

This means HNW property owners are paying more than they should for their insurance, while brokers face potential challenges in verifying fair value, under the Financial Conduct Authority’s (FCA’s) Consumer Duty rules.

“A validation that’s too high may feel safer than one that’s too low, but both ultimately disadvantage the property owner,” says 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 the rebuild cost

Overinsurance often occurs 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 supplied by architects are used in place of insurance-specific rebuild values, despite differing scopes, allowances, and exclusions.

The FCA’s fair-value rules make this issue a more serious concern for brokers and insurers, who must provide evidence that customers have received proportionate cover for the price paid. An inflated sum insured could raise questions during audits and, in some cases, lead to remediation if clients are found to have overpaid.

Regular checks 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 to produce evidence of fair value and regulatory compliance.

“High value doesn’t mean high guesswork,” Matthew Ward continued, “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 underinsured or over-charged.

“Ultimately, the most effective validation isn’t the highest, it’s the most accurate,” concludes Matthew Ward.