DEFINITION OF UNDER-INSURANCE
Known by the Insurance Industry as ‘Average’ the term ‘subject to average’ means that if the sum insured at the time of a loss is less than the insurable value of the insured property, the amount claimed under the policy will be reduced in proportion to the under-insurance.
Insuring your Property and its Contents for the right amount is therefore crucial if you want to be certain that any claim you make will be paid in full. If you make a claim for an amount and your insurer discovers you’ve said your Buildings or internal possessions are worth less than their true value, you will receive less money.
HOW DOES THE ‘AVERAGE CLAUSE’ WORK?
Imagine you’ve valued the contents of your home at £25,000, but the actual value of all the items in your property is nearer to £50,000.
Essentially this means you’ve underestimated the value of your possessions by 50%, so you’re paying less than you should be for your insurance premiums – but in the insurer’s eyes, you only have half the cover you need. And they’ll only pay you for that proportion.
HOW DO I WORK OUT HOW MUCH MY PROPERTY OR CONTENTS ARE WORTH?
It might be tempting to pluck a rough estimate from the air when your insurer asks how much you need to insure for but due to the average clause, getting it wrong could be an expensive mistake.
Insurance Brokers do offer expertise in Insuring your property however are unable to establish rebuild sum insured and often have never seen your property you are choosing to insure.
When buying a new property, you may have had a survey carried out which gives you a Rebuild Value that you must insure for, however if your purchase survey was done many years ago, this may be out of date.
We would recommend that you arrange for a survey to be carried out by a qualified person or you may visit the Association of British Insurers which offers information and an online calculator.
It is worth when calculating how much cover you need going from room to room, making an inventory of the contents of each. Don’t just focus on expensive items – you should include everything you’d need to replace if, for example, you lost everything in a fire. That includes things like bed linen, kitchen crockery, clothing and personal items.
If you wish to review and adjust your cover, please do contact us on 01454 322266 or email firstname.lastname@example.org.
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