Underinsurance is bad news for all concerned. Being underinsured is not something that you normally choose to do; rather it is usually the result of not having been given sufficient relevant advice. The consequences of underinsurance can be dire and can easily lead to you being left in difficult circumstances when the claims you make do not cover your needs.
Underinsurance: Homeowners Beware!
With homeowners moving less frequently and with more people improving their homes with extensions, conservatories, loft conversions and the like, the issue of property underinsurance has become a very real one. It is especially problematic for anyone living in a high value property area or one that has seen significant price rises over time. Underinsurance is particularly worrying for those clients who are looking to insure heritage properties where it is even more essential to have the correct protection in the event of a claim, given the values at risk.
The consequences of not being insured for the correct amount could be serious for two reasons. Firstly, the sum insured may be insufficient to completely cover the full costs of a claim. For example, if you insure your property for £250,000 but the rebuild costs are actually £500,000 then you will be left with a £250,000 shortfall. Secondly, most insurers will include an ‘Average’ clause which has the effect of proportionately reducing the amount they will pay you following a claim by any amount the property is underinsured. So, in the example given above a £100,000 partial loss to the property would only result in a £50,000 payment from the insurer as only 50% of the rebuild costs are insured.
How to Avoid Being Underinsured
So how can you ensure your affairs are properly insured and avoid the underinsurance trap? Well, start by contacting an insurance broker such as Coversure Insurance and ask them to recalculate your coverage limit. This will probably involve answering a detailed questionnaire and you can expect to be asked about square footage of your property, the number of bedrooms and baths and any ‘upgrades’ like hardwood floors, granite countertops, etc.
If you have a top-of-the-line custom built home, you shouldn’t rely on an over-the-phone conversation. The high-end brokers are generally willing to send someone to your home to do a custom appraisal. If you still think that the insurance total is too low, you can talk to builders in your area and get an estimate from them which you can pass on to your insurers.
Underinsurance: If in Doubt, Call your Insurance Broker
Home underinsurance is bad news and it’s one of those occasions where if in doubt, do something, and that something is to call your insurance broker. Equally if you are planning to undertake any kind of major home improvement project such as extension or a loft conversion then contact your insurance broker as part of the project planning. Your premiums may change, but at least you won’t find yourself unable to replace your home in the event of a disaster.
Coversure Insurance offers various types of insurance for properties including cover for high net worth properties. To find out more please get in touch with your local Coversure Insurance broker today.