INdEx LINkINg vERSUS dAy ONE
There are two main methods used by Insurers to protect policyholders from the effect of inflation during the period of cover – Index Linking and Day One
INdExLINkINg
IndexLinking of your SumInsured (which should represent thebuildingsfull reinstatementcost)isthe preferred option for residential properties.
Indexlinking provides protectionfor your blockagainst inflation during the period of “insurance withoutalimit”, and theincreaseconsolidatedintoahigher SumInsured at next renewal. Thereis no additionalpremiumcharged forthis protection.
dAyONE
Generally, this clause is used in policies covering commercial properties.
Therebuilding cost of thepropertyis stated as theDeclaredValue on your Policy Schedule and a percentagemaximumuplift is provided to cover expected inflation.
Forexample,ifapropertyhas arebuilding cost of £1mand a25% Day1clauseapplies, the SumInsured becomes £1.25m. However, themaximumpayable at the timeof claim is only £1mplusthe inflation percentage to the date of damage.
CONdItIONOf AvERAgE
It is well knownthatifapropertyisinsured for, say, 75%ofits rebuilding cost,thenthe claim payment will be 75%of the loss.
However, specialist policiesmayoffera percentage “leeway” to help prevent the Insuredbeing penalisedfor inadvertently underinsuring.
As long as theSumInsureddeclaredis within theConditionofAverage percentage showninyourpolicywording(normally 85%) andthe shortfallisinadvertent,the policyholder will notbepenalisedatthe timeof a claim.
Flat Living GUIDETO INSURANCE 11
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24