presents under tree

Simple tips to avoid underinsuring contents

Underinsurance of contents insurance policies is a persistent problem - this straightforward guidance can help customers reduce the risk of underinsurance.

While customers may have spent hundreds, if not thousands of pounds on presents, it’s easy to see how the risk of underinsured contents typically increases around the festive period. 

Black Friday has prompted many of us to make sure we get the best deal possible for the gifts we buy, especially when purchasing expensive items like laptops, tablets, smart TVs and video game consoles. Therefore as we approach the Christmas period, we need to check we’ve got the right insurance cover in place, should the worst happen.   

Insurers have different ways of dealing with it and, depending on the circumstances, it could lead to customers having their claims settlement reduced or being asked to pay an additional premium. In certain circumstances, it could even lead to the claim being rejected altogether.

Christmas is always an expensive time of year, but by following a few simple steps, policyholders can avoid the costly risk of major underinsurance.

1.Don't underestimate the value of your contents

One of the most common causes of household underinsurance is homeowners simply underestimating the value of their assets. The average home has contents worth over £35,000 – more than the average UK salary of £30,800. That sounds like a lot, but it’s easy to forget the cost of replacing things like curtains, kitchen equipment and light fittings. 

The value of most items can be found online, while unusual or high-value pieces like jewellery or antiques will benefit from a professional valuation. These professional valuations are particularly important, as many owners of antique or vintage items have never had them valued, leaving the potential for significant underinsurance.

While valuing possessions doesn't need to be labour intensive, it can help to go from room to room to make sure nothing gets missed, without neglecting commonly forgotten areas like attics or any sheds, garages or outbuildings that may be included in the policy. In some cases, customers may even be tempted to underestimate the value of belongings in the hope of securing a cheaper premium.

However, to be sure of full claims settlements and to avoid paying additional premiums, it is essential to declare accurate and up-to-date contents values.

2. Add expensive new purchases to your policy

Around this time of year, it is likely that new high value items will be making their way into homes, and it is important that these newly acquired items get added to policies as soon as possible. Failure to do this can mean that new possessions won't be covered or accounted for should any loss occur. This isn't of course necessary for every new item, but a succession of higher value purchases should always prompt customers to notify their insurer about a possible need to increase contents sum insured.

3. Carry out regular reviews and valuations

Perhaps the best way of avoiding underinsurance is carrying out regular reviews, at least every couple of years. Even if customers haven't made any major purchases, most households are regularly acquiring new possessions and the value of these items is always changing.

Prices of some high value items like jewellery, antiques and artwork are particularly susceptible to price fluctuations and underinsurance. External factors, such as gold and silver value fluctuation, for example, can quickly change the value of jewellery, leaving customers over or underinsured. In addition, items are often inherited from family members, meaning that the true value of potentially valuable items is not known.

Jewellery is also often purchased abroad, where original prices can be significantly cheaper than the cost to replace in the UK.

For any item purchased overseas, jewellery or otherwise, exchange rate fluctuations can also influence the current value of possessions. Major life events, such as getting married or having a child, should also prompt customers to reassess their sums insured to discover whether current cover remains suitable.

4. Understand your policy details

As well as providing accurate and up-to-date valuations, it is important for customers to be clear on the detail of their contents insurance policies and definitions, and any exclusions or limits that may exist. Inner policy limits should be of particular note.

For example, many policies will specify a limit for valuables and each insurer may use a different definition for 'valuables'. Understanding these definitions will allow customers to make informed decisions on how to group specific items and how to arrive at suitable sums insured.

Policies may also include certain inner limits for categories of items, such as electrical goods, which if exceeded could cause underinsurance. Customers should also be clear on whether they own any items for which they may be required to provide evidence of ownership or value in the event of a claim.

For example, many insurers will require evidence in the form of a professional valuation, for all items valued at more than £5,000. There can be many reasons for households becoming underinsured, however regular and accurate valuations and an understanding of basic policy details will go a long way towards minimising the risk.

5. Don’t over-insure your assets

Your insurance provider may offer you additional cover, such as protection against accidental damage, on top of your basic policy – however your standard policy might cover everything you need, so make sure you aren’t paying for any unnecessary protection.  

It’s a good idea to speak to your local broker, to make sure you have the right cover for your needs and that you’re not doubling up on insurance across several policies too.

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