Insurance The real cost of being under-insured

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Filling in contents insurance quotes is a chore.

How many of us really know the value or replacement cost of everything in our home? And when you’re faced with a questionnaire asking you to put a value against your total goods it’s easy to under-estimate. Perhaps you think that’s not so bad. At least your premium will be lower if the value of your contents is understated and fingers crossed, you won’t need to claim. But if you do need to claim, and you’ve under-insured, there’s more than one consequence.

For example, you estimate the value of your total contents as £200,000 on your insurance form. Your house goes up in flames and following a review by a loss adjuster, your contents are valued at £400,000. You’d imagine that you’d be entitled to a £200,000 payout to replace everything. Losing 50% of the value of your total contents is not an easy pill to swallow. 

If you’ve insured your contents for less than they’re worth, most insurers will bring in what’s called an Average Clause. This reduces your payout by the percentage that you’ve underinsured.

In the example above, the payout would only be £100k. You underestimated the value of your contents by 50%. They reduce the value of their payout by 50%. So even though you’ve been paying premiums for the £200k worth of contents, you only receive 50% of that.

So how do you make sure you’re not under-insured? Here are a few things that are often overlooked:

The three C’s - carpets, curtains and clothes.

The first two are often missed as people think of them as part of the buildings insurance – they’re not. Don’t forget to include rugs too.


•    Clothes are almost always underestimated. Even if you’re not into labels or handbags, tally up what it would cost to replace the clothes, shoes and accessories you have.
•    Make sure you include any valuable jewellery as separate items on your policy.
•    Lighting – even if you don’t have chandeliers, light shades can be a costly item.
•    The kitchen – dinner sets, crystal, gadgets and expensive cookware.

It’s easy to remember all the large, expensive items like furniture and technology, but everything else adds up too.

Will increasing the value of your contents insured send your premiums through the roof?

Not necessarily. Here’s an example of someone we helped recently.

We took on a high net-worth client that was under-insured by £990,000. Increasing his sums insured by almost £1million cost just £150 more in premiums with the provider we chose. This is an example of how insuring higher value contents to the correct amount doesn’t always increase your premiums comparatively. With his previous broker, that client would have been subject to the Average Clause and if he’d had to claim, would have lost a large amount of money.

Generally, the clients we deal with are classed as high net-worth and the policies we find for them don’t include an Average Clause condition. Even so, we generally visit clients’ homes to help them assess the value or have a detailed discussion over the phone.

LIFT-Insurance specialises in arranging cover for high net- worth clients. If your contents are valued over £100k, we may be able to help you.

Paul Fielding – Latest Blog Posts

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