Research by the ABI (Associated Bureau of Insurance) shows that 1 in 5 households could be underinsured and therefore at risk of picking up a large bill in the event of a claim occurring!
So what is ‘underinsurance’ and why should you be worried about it?
When you come to purchase your contents insurance, there will be an underinsurance clause in the policy that you purchase.
In simple terms, this states that if something happens that is covered by your insurance cover (eg a fire, or flood) that results in your contents being damaged or destroyed, the insurer will only pay out for the amount that has been insured/declared by you when the policy was taken out.
For example; let’s say your actual contents value is £60,000 but you only declared £30,000 at the time of your policy being purchased ie 50% of the actual value. In the event of a claim arising (let’s say it’s a £20,000 claim, your insurer is entitled to pay only 50% of the claim (£10,000)).
There are many reasons why people end up underinsured – a few of the most common include the following:
Forgotten items – make sure you go room by room when making your contents inventory so that you don’t forget items. Don’t do the inventory sitting on the sofa in the lounge – you are sure to forget items that you would of seen if you’d walked round the house.
Missed storage – make sure you include contents kept in the loft, sheds and garages. Most people forget these areas of storage – particularly the loft!
Lower values – at the time, researching the costs of an item can seem painful and a waste of time. Trust us, in the event of a claim it will be crucial that you’ve done this – and with the Internet making everything so accessible, spend that extra bit of time at the outset!
Deliberate lower value – DO NOT deliberately under value your contents to try and get a lower premium. It will not help you at all in the long run if you have to make a claim.
Single items of value – don’t forget to think about any family heirlooms that have been pasted down that may be in a drawer or in storage in the loft. Often insurers will want to know about any ‘single items of value’ over a specified amount.
Think carefully as you compile your contents itinerary – use our handy Contents Calculator on the website to help prompt your thinking.
Once you’ve got your list in place, don’t forget to keep it updated – this way, you know for your insurance renewal the following year if you will need to declare any extra items/value.