Would you be happy to see £20,000 of your own cash go up in smoke? According to a study of 2.6 million customers, many Britons are risking just that by underinsuring their homes.
The average three bedroom home in the UK has contents worth £55,000, but the average policyholder values their possessions at just £35,000, leaving a £20,000 gap. In the event of a home being destroyed or severely damaged, policyholders could stand to lose more than one third of the contents value.
Why home contents are undervalued
Why do we get it so wrong when estimating the value of our home contents? There’s a clue in the list of items most commonly itemised among contents. These are: laptop (they make up 34% of valuables listed), bikes (23%), jewellery (22%), watches (7%) and TVs (2%).
What do these items have in common? They’re high-cost objects which are mobile and attractive to thieves. These are the kind of things we think of when estimating the value of our contents. However, common items that get overlooked include things like the carpets, soft furnishings, crockery, beds and clothing etc. These would still need to be replaced if your home is subject to burglary, fire or flooding. As with all insurance policies, it is best to read through the policy wording or speak to your home insurance broker to check what you are covered for.
An organised approach calculating your home contents
One of the best ways to ensure your home contents valuation is accurate is to take a more ordered approach. Instead of sitting at a table and working out the value of all the belongings you can think of, walk systematically from room to room and evaluate how much it would cost to replace the contents.
This method means you include the big-ticket items like electronics, jewellery and computers but it also helps you remember the value of all the small things in your home: everything from picture frames to lampshades, from occasional tables to curtains and cordless telephones. It can cost a surprising amount to replace a full wardrobe, for example, or a set of cosmetics and beauty appliances. It can be incredibly hard to give a value to everything you own unless it’s right in front of you.
Items commonly overlooked in valuations
Research has shown that some categories of belongings top the charts for being left out of home contents cover. This can be either because the policyholder forgets to include them in the valuation, or because there is a mistaken belief that they are covered when they are actually excluded.
Items stored outdoors represent a major section of items left uncovered by policies. Some home contents policies specifically exclude items kept in gardens, sheds and garages. These objects, such as garden furniture, lawnmowers and expensive barbecues, can be costly to replace. Research has shown that the average cost of contents stored outside is £2,000(1).
Reducing home contents value is a false economy
The hunt for a bargain is another important factor in undervaluing home contents. When filling out an insurance form, it can be tempting to reduce the quoted premium by knocking a little value off your contents.
This only provides a saving if you never need to claim on your insurance. As the purpose of insurance is to protect the policyholder’s property, misrepresenting the value of that property ultimately leaves you open to the risk of uninsured loss.
Itemising high value items
Most insurers set a limit on the amount they will pay in compensation for a single item, usually around £1,000. Belongings that exceed this limit need to be itemised on the policy to ensure they are covered, or perhaps insured under a separate policy.
It is important to keep your insurer updated if you bring home any items that increase the value of your home contents. This doesn’t have to be limited to purchases; it might include inherited furniture or paintings, gifted jewellery such as an engagement ring, or new electronics given to you as a Christmas present.
The impact of lifestyle changes on your home contents
Some lifestyle changes should prompt a reconsideration of whether your home contents policy is accurate. For example, if a new partner moves in with you, or an ex moves out, this will result in a change to the value of your contents. Likewise, when offspring leave the family nest they will take at least a few thousand pounds’ worth of possessions with them.
Other lifestyle changes such as having a baby, taking up a new hobby or investing in a home makeover can also impact the value of your home contents. Unless you want to risk being out of pocket in the event of a claim, make sure you update your policy.
Computerquote provides home insurance policies that offer new for old cover, apart from clothes and bedding. Retain purchase receipts for bigger and valuable items and do not forget to increase the value of your contents insurance if you make a major purchase.
Do you have the right level of home insurance you need? Contact Computerquote to discuss your home buildings and contents requirements on 0800 389 9949 or 023 9224 7870.