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How to avoid under-insuring your home

How to avoid under-insuring your home

It’s estimated that around £266 billion worth of assets in UK homes are under-insured or not insured at all. So what is under-insurance and why does it matter? 

Chris King
From the Home team
minute read
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Posted 28 FEBRUARY 2020

Understanding under-insurance

You’ve got home insurance, so your property and possessions are financially protected, right? Not necessarily. If you don’t accurately value the cost of your home contents, you may be under-insured – and it could cost you thousands.  
Many people are underinsured without knowing it. This means that if they make a claim on their home insurance, the payout might not cover to replace the full value of their goods.  
What that means for you is that if your home contents are insured for only half their value, your insurance provider may only pay half the claim.  
For example, a property with contents valued at £50,000 but insured for only £40,000 is 20% underinsured. If property worth £20,000 is damaged by fire, your insurer could reduce the claim by 20%.  
This means you’d only get £16,000 from your insurer, leaving a shortfall of £4,000 for you to pay.

Avoiding being under-insured

It’s tempting to lower your insurance premium by underestimating the value of your belongings, but don’t.  
The average home has contents worth some £35,000 – more than the average UK salary of £27,000. That sounds like a lot but it’s easy to forget items like carpets, curtains, light fittings, bedlinen and towels. Not to mention things like your kitchen equipment, books, DVDs and clothing. But these all add up. Just think about how much it would cost to replace every item you own.

What else should I look out for in home insurance? 

Check your policy to see what ‘contents’ means in the eyes of your insurance provider. Does it include portable items like your laptop, for example? And does it provide cover for any contents in a shed? And if it does, are there any limits you need to be aware of?
Your policy should reflect what it would cost to replace your belongings at today’s value, not what they cost you five years ago. So really assess your belongings before you take out your policy, and then Compare the Market for competitive home insurance quotes.

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