Is your home underinsured?
The obsession with property in Britain goes beyond bricks and mortar. For some time, filling our homes with beautiful things has been considered the norm, and the economic boom of the last decade has led to more and more of us spending our disposable income on valuable items.
From the latest electronic gadgets, to designer clothes, jewellery, high-tech bikes and lavish home decorations, it is not unusual to spend a small fortune on luxuries.
Why, then, do so many of us undervalue our possessions when it comes to taking out home insurance? According to price comparison website Confused.com, the average family of four estimates the contents of their home to be worth £25,000. However, its research suggests the true value is closer to £55,000.
While you may not consider yourself to be the owner of a valuable item, you might be surprised. For example, Darren Black, head of home insurance at Confused.com, says that many people forget about the value of their clothes when taking out contents insurance, not to mention carpets, curtains and linen.
This can also be an issue for home insurance, especially when it comes to floors: “Wooden floors can be a particular problem; if these are damaged, by flooding for example, they are expensive to replace because in most cases the whole lot will need to be ripped up rather than just a section.”
Ele Field, insurance product manager at Greenbee.com, which offers specialist home contents insurance with unlimited cover for valuables, says people should also ensure their policy includes cover away from home.
"Think about the value of the items you carry around with you - from glasses, watches, jewellery and your engagement or wedding ring, to mobile phones, keys and even make-up, the value can really add up," she explains.
The problem of being underinsured worsens when you consider that many standard home insurance policies generally have limits on particular types of items. This might include bikes, items from the garden, or jewellery such as engagement rings.
In addition, some policies don’t cover valuable collections; this means that items where the value is linked to the total collection, rather than individual items, wouldn’t be covered. According to Greenbee.com, most standard home insurance policies have a single article limit for valuables set at £10,000, and a total limit of £20,000.
For collections of fine art, antiques or even wine, getting the right home contents insurance is essential.
One option is to find a policy that offers unlimited cover on contents. Liz Neild, senior media relations manager at Marks & Spencer Money, says: “Most home insurance policies expect you to estimate what you think your possessions are worth, which we didn’t think was fair. Our home insurance cover is unlimited so contents are covered up to the total value of all of your contents.”
However, Marks & Spencer does require people to let it know if any individual items or sets of collectables are worth £4,000 or more, and there is a £500 limit on cash.
Black says that you could also consider taking out a specialist policy just to cover a high-value item, with the rest of your contents coming under a standard policy. However, he adds that it might be more appropriate to find an insurer that specialises in valuables.
“Valuation can be tough, especially when it comes to collectables and art, but a specialist insurer can help you understand what items are really worth and how much you should insure these for,” he explains.
In addition, while a general home insurance policy may cover valuable items (a collection of rare stamps, for example), you might only receive a token payout should you need to claim. A specialist insurer, however, is more likely to work with you to make sure you are adequately compensated.
Robert Korzinek, an expert in fine art and collectables at the insurer Hiscox, which specialises in high-net worth individuals, gives the example of a pair of Qing Dynasty vases. “If one of these is smashed, it wouldn’t be fair for an insurer to only compensate you for half the value, because the true value is very much linked to the fact they are a pair,” he explains.
Another situation would be a valuable painting that has been slightly damaged. “In this instance, we would help the customer ensure any restoration is done sensitively and that they are compensated for any loss of value as a result of the damage,” Korzinek says.
If you do have valuable items that require specialist insurance, then it is important that you get these revalued on a regular basis – Korzinek recommends a revalue every three years.
However, he adds: “Many people don’t do this, because it can be expensive and intrusive. While not a substitute for professional revaluations, Hiscox has introduced the Hiscox Art Market Research (HAMR) index to help minimise underinsurance - this monitors price movements across a wide range of pictures, sculpture, furniture and wine from auction data."
”Marks & Spencer Money recommends that customers regularly review the value of valuables and keep us informed of any changes,” adds Neild.
The way you house valuable items can also have an impact on your home insurance. An expensive collection of wine, for example, might be protected if a mechanical failure leads to the wine being ruined – but if you fail to make sure the climate control is appropriate for storage, then you might find your claim is rejected.
Security is also an issue. Research from Hiscox revealed earlier this year that the recession could lead to theft-related insurance claims to double by the end of 2009.
Steve Langan, managing director of Hiscox UK, says: “It’s now time to take stock of the belongings you have and make sure they are appropriately protected.”
Langan also recommends homeowners review the security they have in their home.
This includes installing a burglar alarm if necessary, investing in a movement-activated or dawn to dusk lights, and fitting doors and windows with appropriate locks and hinge bolts. “This prevents thieves using credit cards to gain entry,” explains Langan.
You should also think about installing a safe to keep your most valuable items. Neild says people who own valuable jewellery or watches shouldn’t rule out keeping these in a safe: “Thieves know exactly where to look for these items, so they are easy to target in home burglaries.”
Some insurers, including Greenbee.com, will offer a discount to customers who have good levels of security.
Langan adds: “You may find having two safes useful as in the event that you are forced to open one, the other can remain hidden. Store less valuable items in the first safe.”
A catch-all phrase that can range from assessing the price of a property or vehicle before offering it for sale or the net worth of assets in an investment portfolio to the prices of shares on a stock exchange.
Does exactly what it says on the tin: covers the contents of your home for theft and damage and also may insure certain possessions (jewellery, cycles) outside of the home. Things to watch for include the excess and also the maximum payout on individual items. Another grey area is kitchen fittings, as some contents policies say these are not contents but part of the fabric of the property and covered by buildings insurance and some buildings policies don’t cover them because they regard them as contents.