Underinsurance and what it means
Underinsurance: What Is It and Why It Matters
Underinsurance is when a home has not the correct level of cover in place. It can be tricky to know how or why you may be underinsured. Therefore we have prepared a guide to better inform you as a customer about what underinsurance is and what it can mean.
What is underinsurance?
Underinsurance means that the level of home insurance you have isn’t enough. You may be underinsured if you:
• Underestimate how much your home and contents are worth.
• Buy new items or make changes to your home and don’t update your policy to reflect this.
With the rising costs of inflation, it is more important than ever that you ensure your Buildings and Contents are covered for their full rebuilding/replacement cost.
We want our customers to have peace of mind that, should they ever need to make a claim, their home and belongings are protected. Sums insured that do not accurately reflect the cost of reinstating your Buildings and/or Contents can mean you aren’t fully covered in the event of a claim. This could mean you might have to pay more yourself when you claim.
An example of understanding
If the rebuilding cost for your property is £200,000, but you have insured it for £140,000, you are only insured for 70% of the full reinstatement cost of your home. This may result in your insurer only covering you for 70% of the cost of your claim.
Rebuilding costs
In addition to other industries that are incurring rising costs, building materials are also increasing in cost at a faster than normal rate. This means that if you suffer material damage to your home the cost of repairs may be greater than expected, and if this happens it could mean your insurer is unlikely to cover the full cost of your claim. To ensure your property is adequately insured, we recommend using a Rebuild Calculator before renewing your insurance each year.
Contents insurance
When calculating the sum insured for your Contents you will need to consider all of your home possessions and personal belongings that are not part of the structure of the home. The best way to ensure your Contents sum insured is as accurate as possible, is to keep an inventory of your items room-by-room, down to knives, forks, and spoons.
To make sure you are fully covered in the event of fire, flood or theft, you need to have enough insurance to cover all your costs. Giving your Broker/ Insurer an accurate rebuilding/replacement cost for your home and contents is key to avoid being underinsured.
What to do next
If you are concerned about the adequacy of your sums insured or have used one of the above calculators and need to update your policy, please contact your broker as soon as possible.
Ensure your home is fully protected with Open and Direct Home Insurance. Our policies are designed to provide comprehensive coverage tailored to your needs. Contact us today to review your insurance and ensure peace of mind for your home.
Download Customer Guide - Underinsurance