April 16 2014 Latest news:

Householders are risking personal possessions worth hundreds of billions of pounds simply by cutting corners with their home insurance.

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An in-depth study by one of the country’s biggest insurers has found that more than £200bn-worth of possessions in our homes are at risk.

The research revealed that a staggering 5.2 million homes have no contents cover at all, while nearly a further seven million are under-insured.

The risk for people with no insurance is clear, but what is perhaps less appreciated is the risk taken by those who have simply underinsured the value of their contents.

Insurer Direct Line reckons that a quarter of people who do have contents cover have failed to take out adequate protection, undervaluing their contents by an average of £20,000 a time. And that could cause heartache for those who need to make even relatively small claims.

For example, imagine you suffer the misfortune of having your home broken into, and you make a claim for £6,000. You have taken out insurance for £40,000-worth of contents, so you are confident that your claim will be met in full.

But then your insurer finds that the true value of your contents had been £60,000, not the £40,000 you took out cover for.

That means it would be entitled to cut your payout by the same proportion – and in this case, you would probably receive just £4,000.

In other words, in this example, failing to take out adequate cover could see you out of pocket to the tune of £2,000. And in truth, taking out protection for £60,000-worth of contents in the first place would probably have cost you only a little bit extra.

“There is no doubt that recession-hit Brits have a lot on their minds at the moment – but the importance of home contents insurance shouldn’t be underestimated,” said Andrew Morrell, head of home insurance at Direct Line.

“No one wants to think about the prospect of losing all their possessions. But unfortunately, it is far too easy to turn a blind eye to the true value of your home’s contents and grossly underestimate the level at which your insurance should be set – thereby putting your belongings at risk.”

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