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Ed Foss, Senior writer
Wednesday, May 18, 2011
Under-insurance is a difficult concept to get into the public consciousness.
But it is a matter which affects an enormous proportion of people.
The issue has been the subject of this column before, but it seems that the theory simply isn’t sinking in and taking hold.
New research by specialist home and contents insurer Hiscox has suggested 60pc of high net worth homeowners underestimate the true value of their possessions, leaving them at risk of being under-insured.
That means if they are victims of burglary or fire, they may not receive full replacement value.
Some may be aware of this and be happy to accept the consequences as a part of a managed risk. One imagines the vast majority simply do not know they are under-insured.
It’s not a massive surprise. The value of many items – especially the thieves’ favourite jewellery – has changed quite dramatically over the course of recent years. This is as a result of the significant upward changes in the prices of precious metals such as gold in the context of wider economic woes.
And there simply isn’t the same level of interest in using comparison sites to change home contents insurance policies as there is for car insurance policies.
So people remain blissfully unaware of their under-insurance until the worst happens.
The Hiscox research backs up the idea that most people don’t understand the position they are in by not keeping an eye on insurance levels.
They said many homeowners were “surprised” when they discovered the value of the things they own.
Many had not considered the items they have accumulated over the years, items inherited or fluctuations in the value of jewellery, art or antiques.
Andrew Cheney, risk and valuation advisor at Hiscox, said: “After a while even the special things in your home can seem like part of the furniture.
“This means that when it comes to estimating the value of your home contents, it can be easy to forget about items that actually hold reasonable value.”
Regular reviews are needed to combat the problem. The more you own, the more complicated that process is, but at the same time the more important it becomes.
As a starting point, walk through the house and carry out at least the most basic of stock takes. Compare this stock take to your insurance policy.
The result may provide a few surprises, it may increase your premiums slightly, but it may also save you a lot of grief in the long run.
It is unlikely you will be able to value everything yourself unless you have a wide expertise, so it might be worth getting professional valuations.
Here is a list of points to think about while conducting a review.
• Price changes. Many jewellery items have increased due to a rise in the value of gold.
• Accumulation. The number of possessions grows over time, often unnoticed.
• Upgrading. Belongings are replaced with newer, better models.
• Leisure pursuits widen. Golf clubs, sporting apparel – the list is endless.