Insurance The real cost of being under-insured

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Filling in contents insurance quotes is a chore.

How many of us really know the value or replacement cost of everything in our home. And when you’re faced with a questionnaire asking you to put a value against your total goods it’s easy to underestimate. Perhaps you think that’s not so bad. At least your premium will be lower if the value of your contents is understated and fingers crossed, you won’t need to claim. But if you do need to claim, and you’ve under-insured, there’s more than one consequence.

I’ll give you an example.

You estimate your total contents value as £200,000 on your insurance form. Your house goes up in flames and following a review by a Loss Adjuster, your contents are valued at £400,000. You’d imagine that you’d be entitled to a £200,000 pay out to replace everything. Not ideal but your mistake.

Here’s where that other consequence comes in.

If you’ve insured your contents for less than they’re worth, most insurers will bring in what’s called an Average Clause. This reduces your pay out by the percentage that you’ve underinsured.

In the example above, the pay-out would only be £100k. You underestimated the value of your contents by 50%. They reduce the value of their pay out by 50%. So even though you’ve been paying premiums for £200k worth of contents, you only receive 50% of that.

So how do you make sure you’re not under-insured? Here’s a few things that are often overlooked:

  • The three C’s - carpets, curtains and clothes.

The first two are often missed as people think of them as part of the buildings insurance – they’re not. Don’t forget to include rugs too.

  • Clothes are almost always underestimated. Even if you’re not into labels or handbags, tally up what it would cost to replace the clothes, shoes and accessories you have.
  • Make sure you include any valuable jewellery as separate items on your policy.
  • Lighting – even if you don’t have chandeliers, lightshades can be a costly items.
  • The kitchen – dinner sets, crystal, gadgets and expensive cookware.

It’s easy to remember all the large, expensive items like furniture and technology, but everything else adds up too.


Will increasing the value of your contents insured send your premiums through the roof? Not necessarily. Here’s an example of someone we helped recently.

We took on a client that was under-insured by £990,000 (that’s under-insured – we do look after some sports professionals who tend to have more than the average contents value). Increasing his sums insured by almost £1million cost just £150 more in premiums with the provider we chose. Just an example to show that higher value contents don’t always increase your premiums comparatively. With his previous broker, that particular client would have been subject to the Average Clause and if he’d had to claim, would have lost a lot of money.

Generally the clients we deal with are classed as High Net Worth and the policies we find for them don’t include an Average Clause condition. Even so, we generally visit clients’ homes to help them assess the value or have a detailed talk through over the phone.

LIFT-Insurance specialises in arranging cover for high net worth clients. If your contents are valued over £100k, we may be able to help you.

Paul Fielding – Latest Blog Posts

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