Underinsurance - cutting costs could hurt when it comes to a claim

26 October 2009

In the past we've highlighted the perils of underinsurance and the effect it can have on your home insurance should you be in the unfortunate position of suffering a claim. Most of us don't truly know the value to replace the contents of our home but the development of many standard home insurance contracts over the last few years now means that most are happy to accept a substantial nominated amount of, say, £50,000 or even unlimited sums.

Whilst such policies will suit a majority of households, the pitfalls of underinsurance are as prevalent as ever. In the 1980s, investment in fine art saw values increase to exceptional levels which inevitably gave rise to concerns that some individuals were not adequately insured to full value. Today the same message rings true but this time for jewellery and watches where, despite the economic gloom, price increases seem never ending.

Jonathan Payne, Head of Claims Service at Mappin and Webb, says "In recent months dramatic fluctuations in both raw material prices, especially gold and platinum, and currency exchange rates have driven some significant price increases across certain brands, including Patek Philippe, Rolex and Cartier."

"For example over the last 18 months Rolex prices have implemented 4 price increases. The impact has meant steel watch prices have increased by approximately 32% yellow and white gold watches by 34% and some Platinum watches by as much as 40."

Founded in 1774 Mappin and Webb is one of the UK's leading retailers of fine jewellery, silverware and watches. Holder of 2 Royal Warrants, they have a reputation for combining exquisite products with outstanding service. In addition to fine jewellery we stock some of the World's most prestigious watch brands and are the dedicated specialist appointed by Aviva under their Distinct household policy.

According to the Association of British Insurers latest guide on buildings and contents insurance, research shows that one in five households could be underinsured because they did not know how much their home contents were worth. Under-insurance can cause serious problems if you have to make an insurance claim, as your insurance company may not pay out the full cost to replace lost or damaged items.

• Dig out your home insurance documents - and find out exactly what level of cover you currently have for your buildings and contents.
• Calculate your contents - it's easy to under-estimate the value of your contents and possessions. Our contents insurance calculator can help you work out an approximate new replacement value for your home contents. Just ask for a copy.
• Check all your possessions are covered - some home insurance policies don't cover art, antiques or collectables, or items of high value, or the insurance company may require you to list these separately. Make a list of anything you're not sure about and ask us for advice.
• Count the cost of a rebuild - when you get a quote for home insurance you may be asked to specify a 'rebuild cost' - this represents how much it would cost to completely rebuild your home, including materials and labour. This will vary according to the size, age and type of property you have, and can be a key area for being under-insured. The Association of British Insurers has a useful buildings rebuild cost calculator to help you do this, simply visit Association of British Insurers for further details.
• Keep your insurance up to date - it's usually a good idea to review your buildings and contents insurance cover at least once a year, perhaps when you receive your buildings and contents insurance renewal.
• So what happens if your antique Rolex watch suddenly exceeds its original worth? Your average home contents insurance policy today will carry an allowance for the total value of jewellery within the home, simply requiring you to specify any items over a given value, normally around £1,500. But above this limit your insurer is not obliged to pay any extra value unless the item is specified, and even then you will only receive the last notified value. Quite simply you may be disappointed to hear your insurer tell you that they will only pay part of the value, if any at all.

If you're in doubt as to how well you've protected your home and possessions or wish to arrange a review, contact Gareth Williams on 029 2085 5242.