Contents insurance just keeps on giving

CHRISTMAS may be receding in our memories but many of the items you bought or received will be in your home for years and you need to make sure they are correctly insured. Many of us have little idea how much our possessions are worth in total, but research shows the average household has belongings worth a hefty £38,000.

This is an increase of almost £3,000 in the last four years, as the UK’S total physical wealth from all our household contents, possessions and valuables has rocketed to £1.3 trillion, official figures show.

It takes a long time and hard work to build up your personal possessions, so it is worth spending a little time to get them properly covered.

A home contents insurance policy is the best way of doing this but if your possessions have grown in value, you need to make sure that cover has kept pace with your acquisitions.

Many people let their household contents policy run for year after year, without checking what it covers and whether it is enough.

Having sufficient cover is important if you have collectables or valuables, such as antiques, artwork, stamp collections, memorabilia and so on, or if you belong to the one in six households who own between £50,000 and £75,000 worth of goods.

TAKE COVER

The ease of online shopping means you can build up your stock of valuables without realising it, said Becky Downing, chief executive of household insurer Buzzvault: “This makes it easy to bump up the value of your contents without recognising how exposed this leaves you.”

Being underinsured is more dangerous than you think.

Say you have £40,000 worth of contents but insurance for only £20,000. You may think your are safe if items worth, say, £5,000 are damaged, stolen or destroyed by flood or fire, but in fact you will not be covered for the full loss.

As you have only insured half your contents, the insurer may only reimburse half of your losses.

If a claims assessor visits your home and finds that you are seriously underinsured, they could reject your claim altogether. Even if you do have the right amount of cover, your insurer may reject a claim because you have no receipts to prove that you own more valuable items.

Downing said: “Should the worst happen and you find yourself the victim of a burglary, the last thing you need is for a claim to be turned down because you are underinsured or new purchases are not covered.”

Buzzvault, launched in 2013, allows you to record all your possessions on an app and attach photos of items worth more than £1,000, plus proof of purchase or warranty for items above £5,000.

It is worth digging out your policy to check what proof your insurer demands in case of loss or damage.

Complicating matters, home contents policies use two different methods of deciding how much your possessions are worth. Some take a

“sum insured” approach, which means you need to calculate their total value. Others are “bedroom rated”, where cover is based on the number of bedrooms in your home, typically with a minimum sum insured of £40,000 or £50,000.

Research from Defaqto shows that of 396 policies on the market, 238 are bedroom rated, with 112 sum insured, while 46 combine both measures.

Worryingly, 99 policies, or one in four, have a minimum sum insured below the £38,000 national average value of contents.

Defaqto consumer finance expert Brian Brown said the minimum sum insured is often lower on one or two bedroom properties, where people have less room for pricey possessions: “This will be true for most customers, but perhaps not for those with high net worth in a city apartment.”

Brown said if you are underinsured, you are at risk should you claim: “Every couple of years you should carry out a review of your sum insured and estimate how much it would cost to replace all your contents.”

This is important if you make any big purchases, such as suites, dining room or bedroom furniture, or home entertainment equipment. The good news is that almost seven in 10 policies have minimum sums insured of at least £50,000, to ensure cover.

“Those seeking peace of mind and simplicity should consider one of those,” Brown said.

You should also check single item limits for pricier items such as TVS, PCS, laptops, jewellery and so on. Some may set a limit of as low as £1,000, or a percentage of the total sum insured.

“You need to be certain these items are covered, too,” Brown added.

STAR RATINGS

Most policies offer “new for old” cover but some only offer replacement value, which is less valuable. Check what yours offers.

Defaqto.com and Moneyfacts.co.uk have online star ratings services showing which policies have the best features.

Samantha Owens, star ratings manager at Moneyfacts, said your home and its contents are the most valuable things you own: “It is worth making sure they are properly insured, to avoid a significant financial loss.”

‘You should check single item limits for pricier items such as TVS, laptops and jewellery’