According to broad figures from the Association of British Insurers (AIB), one in five homes in the UK are underinsured for the value of their contents. Further more, a study by the Financial Times showed that wealthier households were at the highest risk, with most having insurance for just 25% of the actual value of their possessions.
Are you one of the many UK homes that doesn’t have sufficient insurance in the event of theft, loss or damage?
Also, does your buildings insurance factor in the cost of a rebuild should a disaster strike and wipe out your entire home?
Valuing your own contents is difficult
It isn’t easy to put a value to your own possessions. Particularly as there is significant value in simple day-to-day items that often get overlooked. Items such as clothing, kitchenware and furnishings don’t always get the attention they deserve when it comes to adding up the contents value for the purpose of insurance.
It is therefore understandable that people get frustrated when they are told by an insurer that they are “underinsured”, due to underestimating the worth of their belongings.
Even the Financial Conduct Authority, that governs the insurance market, agrees that it is un-useful to expect consumers to be expert at valuations.
“…we wouldn’t expect consumers to be experts at this…” Financial Ombudsman
It is only following a claim that homeowners realise they have undervalued their possessions, after which it is invariably too late.
5 steps to ensure you are not underinsured
Sometimes claims that are underinsured are honoured by the insurer. Other times they are not, and a reduced amount is paid based on the actual value stated in the insurance policy.
Either way, don’t run the risk of not receiving a full claim in the event you need to make one.
Make sure you are adequately covered by:
(1) Reviewing your existing policy
Find out the current value you have stated for your contents and buildings insurance, per the policy.
(2) Recalculating the value of your contents
Check current prices for all contents, considering the cost to replace them. Seek to get a professional valuation for any valuable items, such as artwork, jewellery, heirlooms, antiques, even your wine collection!
(3) Checking your policy to ensure everything is covered
Some policies don’t cover certain items, for example artwork, collectables or specifically high value possessions. Double check with your insurance broker regarding anything you are not sure about.
(4) Calculating the cost of a full rebuild
As part of the quoting process, the insurance company may ask you to calculate the cost of a rebuild, to cover the worst case scenario that you lose everything.
An insurance broker can help you to get this right, and point you in the direction of useful online tools.
An accurate calculation is important, as this is a common area for underinsurance.
(5) Always keeping your insurance updated
At least once a year it is important to update your insurance. Not only is it a good way to save money, as cheaper policies come available, it is also important to make any amendments if your situation has changed in the previous 12 months.
Unlimited home insurance cover
Some insurers provide cover on what’s called a “Bedroom Rated Policy”. In layman terms, this means they provide clients with a blanket sum insured for both contents and buildings with the premium being calculated based on the number of bedrooms the property has.
The insurer will still likely request an approximate rebuild cost and contents “new for old” replacement cost from you as part of the wider risk detail collection, however, having a blanket cover does give you peace of mind if you are unsure as to how accurate those estimates are.
Check with your broker as to the basis of cover provided, and if they have Bedroom Rated policies available. To find out more about your home insurance options in general, speak to a specialist insurance broker.
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