When taking out a home insurance policy, many individuals would struggle to answer whether they had accurately valued the buildings and contents they want to insure or the 'sum insured' as insurers commonly refer to it. Underinsurance typically becomes a problem when homeowners or renters are in the stressful situation of making a claim, and they find they have no cover for some of their damaged or lost possessions.
According to the Financial Ombudsman Service (FOS), some of the underinsurance complaints they investigate state that the customer was understated the sum insured on their application form, so the value isn't accurate but still seeks to claim. Buying insurance from a broker with many years of experience can help protect against issues such as underinsurance because we ensure our customers know what information they need to provide to be fully insured.
· Many customers do not fully understand the term 'sum insured '. No insurer expects their customers to be insurance experts, but it's important to understand that the figure required for insurance is the amount it costs to replace all their belongings on a new-for-old basis at the time of a claim or in the case of buildings, the cost to fully rebuild the property in the event of a total loss claim. 'Blanket cover' policies can be helpful for some customers because they provide standard limits, for example, £1,000,000 for buildings and £100,000 for contents. When dealing with a 'specified sum insured' policy, where a customer chooses the exact amount to be insured, an accurate figure is required.
Home insurance policies vary widely, so it's important to talk to your broker to understand differences in policy limits for items such as 'valuables'. Some policies might have a single item limit of £1500 for valuables, so if you own a diamond ring worth £3000, you would need to let your insurer know to add this extra higher value item onto your policy.
Where insuring jewellery, it's vital to get it professionally valued before insuring it. Most insurers ask for receipts, photographs, or professional valuations for all items valued at more than £5,000. Jewellery is often underinsured because the owners have forgotten to obtain up-to-date valuations; this cannot be changed after the customer has claimed. Jewellery is a more complicated item to insure because gold and silver prices can fluctuate dramatically each year. Jewellery is often inherited from family members, and the owner may not know the actual, current value. Jewellery is sometimes purchased abroad, where prices can be significantly different to replacing an item in the UK.
It's essential to reassess the value of your home insurance needs at least every couple of years. We are all constantly buying new possessions, and the value of those items is continually changing. For example, an additional laptop, tablet or wearable technology could cause an inner limit to be exceeded if the policy's definition of 'valuables' includes audio electrical items.
Customers going through a significant change in circumstances, such as getting married or having a child, ought to reassess their sums insured to determine whether they're fully covered. It is also essential for customers to check their buildings sums insured, particularly if they have a sum insured contract or have held the policy for a long time. This calculation is always be based on the current rebuilding cost rather than the market value
Kerry London is proud to be the trusted insurance broker and Platinum Sponsor of BITA. With over 35 years’ experience and a Lloyd’s of London accredited broker, the organisation has vast knowledge in the bespoke personal insurance market.
Should you require any further advice or more detailed support, our team are on hand and happy to help you.
Tel: 01923 211 290
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