Are your valuables protected? The problems of underinsurance
Your ceiling is leaking, and the carpet is damaged. It’s time to call your insurers and get it fixed before the damage gets any worse. It turns out you need some roof tiles replaced as well as the carpet, and the price soon ramps up.
Making a claim with your insurer is easy enough, but what happens when you are unknowingly underinsured? Your insurer will only pay the percentage of the bill that you are covered for and you are left out of pocket by footing out the rest of the damage costs. This can work out to be very expensive.
Here are some steps you can take to make to ensure that you are protected from the problems of underinsurance.
Working out the rebuild cost of your home
A common mistake that people make is to assume the cost to rebuild their home is the same as the price they paid for it or its current market value – if you use any of these figures you may end up being over-insured, spending unnecessary amounts for cover.
The rebuild cost will depend on numerous factors including the age of your home, what region of the UK you live in, and even the material it is made from. There are many resources and calculators online to work out the cost of rebuilding your home, but they produce rounded estimations rather than concrete results.
It is always best to consult a professional surveyor for peace of mind when it comes to conducting the measurements of your home accurately. Talk to your insurer who can recommend someone who will know the requirements and restrictions of calculating rebuild costs.
Also remember that this value will change over time, so you will need to have your rebuild costs recalculated regularly, particularly if you’ve made any changes to your house, such as adding an extension, interior decorating etc. Your insurers will then be able to let you know if you are still covered with their policy to avoid becoming underinsured.
Calculating the cost of replacing items
The replacement value of your items is simply the total cost involved in replacing them. This value may change based on the ease of replacing the item – for example, you may have to substitute the item with something of similar value if the exact item is no longer available.
A good example of this may be a particular model of washing machine or dishwasher – is this exact model still being made, or would it have to be replaced with one that costs a different amount?
The value of the contents in your home can change on a regular basis due to earning more money, a change in the number of people living in your property and a variety of other factors. It is on you to let your insurers know if the value of your items changes and goes beyond the amount that you are covered for so that you can change your policy accordingly.
There is no use in making guesses regarding the cost to replace items because underinsurance will rear its ugly head once again and you will be left paying more money to cover the remaining costs.
Speak to your insurers
If in any doubt about whether your insurance policy accurately reflects the value of your home and its contents, get the advice of your insurers who will be able to recommend the steps you need to take if you are being underinsured for any of the policies you have taken out. Also be sure to check with your insurers exactly what is covered by their policy when it comes to your home or items being damaged.
Here at Insure4Retirement, our Buildings Insurance goes up to £1,000,000. We also cover up to £100,000 contents cover as standard, so click here to get a quote today!