What is index linking?

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Index linking is the mechanism whereby buildings sums insured are increased each renewal to give inflation protection for the building so that providing the starting figure is accurate (obtained from an RCA), the declared value will stay true over the years and be sufficient to rebuild the property in the event of a major incident and claim.

Index-linking is not based on the general rate of inflation, it is calculated based upon the cost of items relating solely to the re-building of property.

The calculation of and setting of index-linking rates is not calculated by the insurance companies partly as it is a specialist area and kept separate and independent. Insurers may however, interpret the data with slight variation. There are several different independent organisations that provide this service, providing insurers with a choice. The most common organisation is the Building Cost Information Service (BCIS) who operate under the umbrella of the RICS and provide their figures to the Association of British Insurers (ABI).