Everyone's complaining about the terrible weather we're having this summer but of course over here we're really not too bad in comparison with the horrific flooding in England. Many people over there have suffered the devastating loss of their homes and it should be prompting in everyone's mind the very important issue of insurance and the big question are you adequately covered or are you covered at all??

Your house needs to be insured for the cost of re-building or re-instating the property. If a property is not insured for its full re-instatement cost and is subsequently destroyed then clearly you will not be able to rebuild it with the proceeds of the insurance policy.

The re-instatement cost includes demolition, removal of debris, architect's, surveyor's and legal fees, rebuilding and any additional cost needed to comply with local authority requirements. A number of years ago this figure would often have exceeded the market value of the property, however due to the soaring property values in the last 2 years in particular, the re-instatement value is often less than the market value. The main exception to this rule is in the case of a very old property where the cost of re-instatement to its original style may be greater than its market value.

It is important to keep the insured sum up to date and the most effective way of doing this is through index linking. Many lenders now increase insurance cover automatically each year by reference to the House Rebuilding Cost Index prepared for the Association of British Insurers. Insurance cover on the structure will vary depending on the area in which the property is situated, the size of the property and its age and also the difference between the various insurance companies and the extent of the cover.

In addition to insuring the structure of your home, you also need to insure the contents. The cost of this may just be as high as the cost of insuring the property, as it is probably more likely for a burglar to steal valuable contents from your house than the property being destroyed by fire, flooding or otherwise!

The bottom line is that building insurance is essential – few people could afford the replacement cost of their home if it were destroyed. Equally any lending institution which has lent money on the security of a property also needs to ensure that the property is adequately insured so as to avoid possible loss of its security.