What is index linking?

Before we go into the details of index-linking for buildings insurance, it’s useful to know the difference between the ‘rebuild value’ and the ‘sum insured’ on your policy documents.

  • The rebuild value of a property is the total cost of rebuilding the property to its former state following a total loss.
  • The ‘sum insured’ includes a percentage increase on top of the rebuild value, and is designed to cover inflation during the insurance year.

Index linking is essentially how the difference between the ‘rebuild value’ and the ‘sum insured’ is calculated, and its purpose is to prevent a property from becoming under-insured. Buildings indexing is performed by the Royal Institute of Chartered Surveyors in the House Rebuildings Cost Index, but index linking can also be applied to contents insurance.

When your policy is index linked, it means that if there’s a change in the rebuild cost (for example, the cost of bricks were to increase ), your insured amount will automatically increase. This means you don't have to re-value your property each year for insurance purposes - however for index linking to work effectively, the rebuild value must be correct at the start of the policy. If you’re unsure about the rebuild value of your property, you can find out more on the ABI website.

Index linking can be applied to both landlord and home insurance, as well as other types of property insurance – such as commercial property insurance.