The Perils of Underinsurance and the Pitfalls to Avoid

When taking out a household policy you are asked to assess the value of your home and assets. For many this is fine, and for many the insurer’s standard limits are high enough to allay any fears. However, when things such as jewellery, fine art and collectibles are involved, calculating their values can be a complex and challenging task often requiring specialist advice.

Of course various guides are provided online but they tend to relate to standard homes and their contents. Underinsurance can however be a key concern for customers that have high value homes or possessions.

So what happens if you’re underinsured? Quite simply if you calculate your contents to be worth £80,000 and insure for this value but it turns out you should have £100,000 insured, for any claim you will receive 80% of the value. So if you were to lose a watch valued at £10,000 you would only receive £8,000 as you had not insured your possessions for the right value. As you can see, this can put you in a difficult predicament.

Underinsurance is particularly worrying for those clients insuring heritage properties, where it is even more essential to have the correct protection in the event of a claim, given the values at risk. Keeping buildings and contents sums insured up to date can be a major headache when it comes to renewal of a policy particularly with ever changing trends in fine art and contemporary fashions

For most customers deliberate underinsurance is not something they choose to do, but if they do not get relevant advice from their insurer and broker, then it is something that can easily occur.

Refreshingly there are insurers such as Hiscox, Chubb, Horizon, Aviva & Sterling who believe it is far better to work with the broker and provide the client with a professional and free assessment solution at the commencement of each policy.

To help combat the issue of underinsurance on larger and/or heritage properties, Sterling & certain other of the insurers can offer a walk-through validation service to assess the contents, fine arts and antiques values with specialist advisors. If you feel you will benefit more from a valuation of jewellery and watches, you can opt for a jewellery valuation which some of the insurers will provide free of charge, as will they often also give a free buildings valuation.

(Source – Sterling Insurance)

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