Recent research has suggested that one-fifth to one-quarter of UK homes are under-insured. And this figure is nearer two-thirds for higher-value homes. (Source: Association of British Insurers).
What happens if I make a claim, but I don’t have enough cover?
If you under-insure your home or contents, you are running the chance of being penalised when you make a claim. For example, a claim for £12,000 could be reduced to £9,000 if your total insurance is found to be 25% less than it should be. The ‘average clause’ enables insurers to do this, which is found in most policies. So it’s vital to set your sums insured at the right level. It is particularly important to have sufficient cover if you live in a listed property as you can legally be demanded to rebuild a property to exactly how it was before the damage occurred, no matter what the cost may be.
Should I insure my home for the rebuild or market value?
You should insure for the rebuild value, which is the cost to rebuild your home to its previous standard. The market value reflects its desirability and the cost of the land. Calculating rebuild costs for standard homes is relatively simple. For higher value homes it’s more difficult as the rebuild can involve specialist craftsmen and unusual materials. A few specialist insurers will send an expert appraiser to calculate the costs for you, so the responsibility is on the insurer not the owner to get it right.
How do I avoid contents under-insurance?
The most frequently overlooked items are: clothing, jewellery, art, soft furnishings, wine, electrical items, sports equipment and garden equipment/furniture. Visit each room to calculate the cost of replacing everything at today’s prices.
How do I know if I have enough cover on jewellery or art?
Valuations are usually recommended at least every three years. Jewellery values have recently been affected by rising precious metal and gem prices which has resulted in valuations which have been conducted one-two years ago being potentially inaccurate. Art prices fluctuate due to changing trends or the death of an artist. Regardless of the sum insured, many policies will only pay the market price for valuables, which is potentially less than the replacement cost. To avoid this, some specialist policies enable you to set an ‘agreed value’ for an item. This will be the exact sum you are paid whenever you make a claim during the policy year.
I cannot stress enough the importance of having adequate home insurance. Getting the right policy can often be difficult and frustrating due to the wide amount of variables and options that are available. If you would like us to review your current home insurance policy get in contact with me on 028 90 668700 and we will make sure you avoid the error of under-insurance.
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Census Financial Planning is an independent financial planning practice providing a professional and comprehensive financial planning service, located on the Lisburn Road in Belfast, Northern Ireland.