Danni Worth (Columnist)
The consequences of being underinsured are often a reduced payment from an insurer when you need it most.
Research clearly shows that most homeowners greatly underestimate the value of their general contents and possessions, as the following case study shows:
Case study 1
- Hall – €2,750
- Study – €29,800
- Lounge/dining room – €37,100
- Conservatory – €11,800
- Kitchen – €6,600
- Master bedroom – €23,940
- Bedroom 2 – €9,000
- Bedroom 3 – €7,780
- Other items – €30,050
- Utility room – €1,750
- Outside and garage – €13,200
Client estimate of value – €100,000
Actual value – €177,520
% Underinsured – 56%
Case study 2
- Hall – €1,410
- Study – €4,490
- Lounge/dining room – €34,950
- Conservatory – €4,805
- Kitchen – €6,060
- Master bedroom – €15,110
- Bedroom 2 – €9,000
- Bedroom 3 – n/a
- Other items – €32,085
- Utility room – €815
- Outside and garage – €6,500
Client estimate of value – €60,000
Actual value – €110,310
% Underinsured – 54%
In the above example a contents claim of €50,000 would have resulted in a claims settlement of €28,000 in Case study 1, and €27.000 in Case study 2. You can therefore see the grave danger that being underinsured presents at a time when you need your insurance policy to perform.
Underinsurance is the consequence of many factors, including:
Accumulation – our possessions grow over time, and we tend to purchase more personal effects, such as jewellery, cameras, sports equipment, clothes, laptops etc.
Prices change – generally speaking upwards, and in the case of art, antiques and jewellery, often at a significant pace.
Our interests broaden – leading to collections of various types.
Our leisure pursuits require the purchase of expensive equipment – golf clubs, skis, surf boards etc.
Children happen – and with them comes a whole new variety of toys, gadgets etc.
The best way to ensure you are insured correctly is to systematically go through each room in your house and list what it would cost to replace each item – including clothes, curtains, linen etc.
Most claims are for partial losses, however, if you suffered a total loss could you replace your home and all your contents and possessions for the figure currently quoted in your policy?
Act now to ensure you are not a victim of underinsurance.
If you are unsure whether your current level of insurance is adequate, please contact us on 952 882 273 or [email protected] and we will be happy to advise you.
Be afraid, be very afraid. Then give another financial wizard some more of your money. Insurance would be great if the companies didn’t weasel out of paying on the slightest pretext.