Understanding indexation

Indexation for your property insurance

Indexation is a way of adjusting property insurance sums insured to keep up with changes in inflation and market conditions. This helps ensure that your insurance remains adequate over time, guarding against the risk of underinsurance. We apply indexation guidance to you at renewal to make sure your property sums insured keep pace with inflation.

Recommendations at renewal

At renewal, we currently recommend increasing your buildings sums insured by 5%. This helps keep your coverage in line with rising costs and inflation.

We have based this on forecasted national averages and several public indices, which are all independent of Zurich:

  • Building Cost Index (BCI): Tracks the prices of building materials.
  • Tender Price Index (TPI): Tracks the costs incurred by contractors, including labour.
  • ABI/BCIS House Rebuilding Cost Index: Calculated by the Building Cost Information Service (BCIS) for residential buildings.
  • Retail Price Index (RPI): Measured by the Office of National Statistics to reflect consumer inflation in the UK.

We’ll give you early notifications about terms and rating before your renewal.

Considering inflation: Although inflation has returned to pre-COVID levels, economic uncertainties could cause future increases. To help guard against underinsurance, we recommend a minimum increase of 5%.

Meeting your obligations

It's important to comply with the Insurance Act 2015 by fairly presenting your risk and highlighting key information to us. Also, ensure you meet the policy terms, especially for higher risk areas like unoccupied properties and fire and security protections.

Reviewing your cover

When reviewing your property insurance, consider including the following:

Day one uplift

This protects you from underinsurance during prolonged or delayed reinstatement due to inflation. Ensure you have adequate Day One Uplift cover, and we can provide premiums for higher rates.

Business interruption sums insured

This covers your annual income, profit, or increased working costs over the Maximum Indemnity Period. It covers you until property damage is reinstated and your operations return to normal or the Maximum Indemnity Period ends, whichever comes first. With higher material costs and longer reinstatement periods, you might need to increase your Business Interruption Sums Insured.

Business interruption maximum indemnity period

Consider material and labour shortages which can lengthen reinstatement periods. Make sure you have enough time post-reinstatement for your operations to normalise. This might mean increasing both the Maximum Indemnity Period and the sums insured. We can provide premiums for longer periods.

Discussing your needs

We’ll talk to you about any recent property valuations and how they might affect the indexation you need. If you decide not to follow our guidance, we might adjust the premium we charge you. Policy terms may also change, like adding caps to the sums insured to limit cover for individual properties to the declared amounts.

Not all buildings need full reinstatement cover, and this can change over time. We aim to ensure you’re only paying for what you need. If full cover isn’t necessary, we can quote for more specific cover, potentially lowering your premiums and required security measures.

If you have any questions, feel free to email us. We’re here to help.