Often mistaken as the same thing so what’s the difference?
Buildings Declared Value (BDV) and Buildings Sum Insured (BSI) are often confused and it’s important to establish what sort of policy you have. If your policy shows a Buildings Declared Value and a Buildings Sum Insured then your policy includes an allowance for inflationary factors which can happen between the day your policy starts and the date of a potential claim and the time taken for the repairs or rebuilding work to be completed.
The BDV is the value of the property, the bricks and mortar, everything that’s fixed to the property, including fitted kitchens and bathrooms on the day the policy starts. It doesn’t take into consideration the value of the land or the desirability of the area; it’s simply the rebuild cost. The BDV should represent the total cost of re-building including damage to outbuildings, car parks, professional fees and costs to comply with local and EU legislation and should also include an allowance for debris removal costs.
The Sum Insured figure is always higher than the BDV to cover you against the rise in building materials or inflation over the period of insurance, for example; on the last day of the policy the price of bricks may have seen a rise of 15% (as forecasted for 2017*) and the BDV value you provided on day one of the policy could be far lower than the actual rebuilding costs on the last day.
Policy schedules often show two buildings values; one referred to as the declared value (commonly shown in brackets) and one as the sum insured, so it can get confusing. Remember the important difference between these two is how the policy protects you against inflation in rebuilding costs.
The policy then includes an allowance (typically adding a maximum of 50%) for inflation during the year and, more importantly, during the rebuilding period, which, in the event of a serious loss, could be a number of years. Declared value is often referred to as ‘day-one value’. We always recommend you arrange cover on a ‘day-one declared value’ basis.