Is my home underinsured? All your questions answered

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With inflation at eye-watering levels throughout 2023, everything has gone up in price, from food and drink, to white goods, other household items and even building materials. That means it is easy for you to quickly become underinsured.

This blog explains everything you need to know about underinsurance and offers guidance on how to make sure your home and its contents are adequately covered.

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What is underinsurance?

As a homeowner, you should know the approximate value of your home and its contents. You should also have a rough idea of what it would cost you to rebuild your home – rather than its current market value – in the event that disaster strikes and it is damaged beyond repair. If your estimates are too low, which can easily happen in periods of high inflation, you will be underinsured.

For example, if your contents are now worth £60,000 but you only value them at £30,000 on your policy, you are 50% underinsured. In the event that you need to make a claim, some insurers would only pay 50% of your claim, leaving you to foot the bill for the other 50%.

Even if the amount you claim is less than the total sum insured, you won’t have paid the right premium for the cover you need so your claim payment may still be reduced.

If your home’s market value is currently £400,000 but estimates suggest it would cost £500,000 to rebuild, you would be underinsured by 25%, or £100,000.

Read our blog about how your insurer can help if your home becomes uninhabitable in the event of a disaster.

How can I work out if I’m underinsured?

First calculate how much your belongings are worth. You should do this regularly, every year, as values can change rapidly. Consider everything you would need to replace if you had a total loss.

Then, check the value against your policy to see if there is a discrepancy and work out how much it is and increase the amount you are covered for accordingly.

If you have a standard home, you can get a rough guide to rebuilding costs by registering with the Royal Institute of Chartered Surveyors (RICS) and using their Building Cost Information Service Calculator

A surveyor will be needed for higher value, non-standard homes, such as grade listed buildings or homes that have more than one building in the grounds. You can find a chartered surveyor near you on the RICS website.  

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How can I avoid being underinsured?

There are a number of precautions you can take to prevent being underinsured.

  1. Check the amount you are insured for. If your policy has a single item or total claim limit, check that these are still sufficient to cover any claim you may have to make.
  2. When calculating the value of your contents, do so room by room so you don’t forget anything. Don’t overlook things you may have stored in a loft, basement or garage.
  3. Work out the cost to replace the item now, not what you paid for it originally as inflation may have made many items in the home more expensive.
  4. Include any new high value items you have bought since taking out your contents insurance and get them added to your cover.
  5. Don’t forget any antiquities, works of art or family heirlooms as their values could increase with inflationary pressures too. Get them professionally valued for replacement on a new basis as an insurer will not replace an antique ring, for example, with another antique ring.
  6. Get an up-to-date estimate on your home’s rebuilding costs on RICS’s Building Cost Information Service Calculator and let your insurer know about the new estimate.

Find out how to save money on your home insurance without scrimping on cover in our blog. 

Speak to a specialist broker about your home insurance

Whatever home you live in, Adrian Flux can provide tailored household and contents insurance for all types of properties, including non-standard and high-value homes. 

Call 0800 369 8590 for a quote or book a callback at a time that suits you.

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