Home insurance is a little like the seat belts in your car. You may never need to put it to the test, but it will be too late to sort it out if you do. Unfortunately, the fact that it doesn’t seem urgent can lead many people to ignore keeping it up to date. And, while finding out you’re under-insured when you make an insurance claim isn’t quite as devastating as flying through the windscreen, it can leave you seriously out of pocket.
Of course, in these difficult times it’s tempting to look for expenses you can cut, and unfortunately some people see home insurance as one of these. It’s been estimated that around 25% of homes in the UK are either under-insured or not insured at all.
To make matters worse, many of these are still paying their monthly premium, which could be nothing more than throwing money down the drain. If you’re under-insured, the insurer’s loss adjuster won’t authorise the payment you need, if you need to make a claim for fire, flood, theft or criminal damage.
What Can Go Wrong?
Any home should have two forms of insurance — building insurance, which covers damage to the structure, and contents insurance, which covers the movable possessions in the house. If you’re a homeowner, you’re responsible for both, whereas if you’re renting you normally don’t need to worry about building insurance.
Prices generally rise over time, but they’ve soared over the past couple of years. This means that the cost of replacing possessions lost in an incident may be significantly higher. For example, suppose you bought a TV a year ago for £1,000. Prices of TVs have jumped by around 30% since then, so it might cost you £1,300 to buy the same model today. Yet, if it’s still insured for the original price, that’s all the loss adjuster will allow you.
Finding an extra £300 might not be the end of the world, but multiply that for all your possessions, and you could find yourself seriously out of pocket. A survey by one Insurer suggests that adults on average buy £1,000 worth of new goods a year. A good practice is to keep a contents checklist which you regularly update — perhaps doing it on a room-by-room basis.
The position is even worse with building insurance, since the figures are significantly higher. Property prices have been worse hit by recent inflation than most other purchases, so your home’s value is likely to be substantially higher than when you insured it.
So what does this mean, if you have to make an insurance claim on your building insurance? At best, the insurer may apply an average clause. If you insured your home for £200,000, for instance, and it’s now worth £400,000, you’ll only receive half of any claim you make. At worst, they could decide that the under-insurance voids your policy, and you’ll receive nothing at all.
So make a habit of regularly reviewing the value of both your home and possessions. The best thing is to speak to an insurance broker, who can guide you through the process — then Allied Claims will be able to make sure you get every penny you’re entitled to, if you have to make a claim.
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