En Voyage_Issue#11_Flickbook

Business
OLIVER GOATER, MANAGING DIRECTOR
NETWORK INSURANCE & FINANCIAL PLANNING
IS YOUR PROPERTY
UNDERINSURED?
In today’s
economic
climate and with
the rise
of non-advised
insurance sales (particularly
through price comparison websites),
many customers focus on the price
of the insurance, rather than the cover
provided and may inadequately insure
items to maintain lower premium levels.
Research suggests that one in five
households could be underinsured.
But if you have not had a claim before
then it can be difficult to see just how
much of an impact underinsurance
could have on your personal
finances. So what is underinsurance
and what does it mean to you?
When you take out insurance of
any type, your premium is calculated
on your individual circumstances
and the amount of cover you’ve
selected. Underinsurance occurs
if you have not taken out enough
cover to meet your needs.
Underinsurance can result in claims
being rejected, additional premiums
being requested, or most commonly,
settlements being proportionately
reduced by the level of under
insurance, (known as “average”).
To illustrate the principle of
average more clearly: if you have
£250,000 of buildings cover, but your
reinstatement value should actually
be £500,000, you may only receive
half of any claim you make on that
insurance. Putting this in context,
if you suffered a partial loss, and
the costs to reinstate your property
were £100,000, the claim would be
settled at £50,000 as only 50% of the
replacement value was declared. This
would mean that you would need to
source additional funds to account for
the shortfall in the claim settlement.
Once a loss has occurred, it
is too late to avoid the negative
impact of underinsurance and
this is why it is so important to get
your sums insured right. Can you
really afford to take this risk to save
a few pounds on the premium?
SO WHAT ARE THE
MOST COMMON
MISCALCULATIONS?
Buildings – One of the most common
discrepancies is between the market
value of the property and the
reinstatement cost. If in doubt you
should speak with a qualified surveyor
who can adequately assess this. The
reinstatement value should include the
full cost of rebuilding your home using
local contractors and appropriate
professionals, including demolition
and site clearance. This can be less
than or greater than the market value.
Contents – some of the most
commonly forgotten items are
carpets, curtains, expensive
cookware, wardrobe contents and
garden tools. You should assess
items on the full new replacement
cost of the contents of your home,
regardless of their age or original
purchase price. Consideration
should be given to inherited
items as well as new purchases
over the period of insurance.
Personal Possessions - Items of
value for which cover is required
outside your home (including for
travel/holiday purposes) are insured
as Personal Possessions. Cover is
not standard and you may find these
items are not covered when you
leave the home. Most insurers will
also have different limits for single
items so check the policy wording.
HELPFUL TIPS:
• Do not be tempted to underinsure;
this could lead to a larger
financial loss versus the premium
you would pay for insuring
items for their true value.
• Check the definitions of contents
and buildings – insurers policy
wordings differ so it is important
to correctly identify where
items should be insured.
• Read the small print – insurance
policies have different covers and
inner limits. Knowing what these
are may save the inconvenience
of a repudiated claim.
• Carry out regular valuations/
assessments, particularly if
you improve your home or
acquire new possessions.
• Speak with an insurance broker
who can talk you through
the covers and provide you
with a policy that is tailored
to your specific needs.
Once you have done all this you
may find you need to increase
the sums insured under your
household insurance, and the
prospect of doing so and incurring
an increase in your premium is not
one that you will relish; however,
it is better than the alternative.
Our advice is talk to a broker, like us
at Network Insurance. Whilst a broker
is not expected to calculate the sum
insured, a broker must take reasonable
steps to ascertain your needs and can
provide you with an explanation of
how to calculate an appropriate sum
insured, as well as providing clarity on
the cover so you can fully understand
the policy terms and conditions.
RESEARCH SUGGESTS
THAT ONE IN FIVE
HOUSEHOLDS COULD
BE UNDERINSURED.
In addition to having a range of
insurance products for policyholders
who know their sums insured,
Network also have access to a
range of insurers who offer blanket
cover with £1,000,000 buildings
cover and £100,000 contents cover
as standard, which can reduce
the worry of underinsurance.
At Network we have access to
insurers whose contents only
policies start from as little as £65
and buildings & contents start from
as little as £175 so get in touch
with one of our qualified advisers
today for your tailored advice.
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