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The importance of working with a personal insurance specialist

September 19, 2023

According to the comparison website Quotezone’s quarterly Home Index report, 40% of UK homeowners do not take out Accidental Damage cover for their home contents, despite the premiums being low. Accidental Damage covers homeowners for any damage that occurs to their property, regardless of who was at fault.

This startling statistic is compounded by the fact that “underinsurance” is a common challenge for homeowners. Our experience teaches us this is often caused by a habitual renewal of policies and purchasing insurance from online quote comparison sites, which puts an onus on the homeowner to know the replacement cost of the contents of a property and the cost of rebuilding the property. However, customers aren’t usually experienced in calculating these costs. In the event of a claim policyholders often find the expected settlement to be dramatically reduced, as insurers can apply the condition of Average.

The condition of Average

The condition of Average means where the sum insured is not enough to cover the full cost of the claim, insurers can reduce their liability by discounting any settlement by the proportion of underinsurance.  For example, the sum insured is 25% less than the total value at risk = claims settlement reduced by 25%.

Although average clauses are common in home insurance policies, not all policies have them. The issue of underinsurance is so prevalent that the Financial Ombudsmen Service (FOS) includes guidance to this subject on their website.

The FOS guidance concludes that it is reasonable for insurers to apply the average clause if the customer was:

  1. asked to confirm the total replacement or rebuild cost
  2. given clear guidance on how to calculate those figures
  3. clearly told about the consequences of providing incorrect figures

Often when purchasing personal insurances on-line customers are selecting insurance on a “non-advised” basis and missing out on the professional service and advice that a broker will provide. Our Private Clients team provide support and guidance to clients and deliver a bespoke service and suite of recommendations. The team work with clients to consider the replacement value of all contents, valuables and jewellery including prestige watches and the like. We also provide guidance and recommendations for valuations and guidance as to how to evaluate and evidence sums insured.

Are you underinsured?

The top ten indicators you could be underinsured include:

  1. Your property or specific property features are listed, made of stone or other nonconventional materials/has unusual construction features such as Thatched Roof.
  2. Your home has been altered or extended
  3. You have replaced contents and furniture resulting in significant expenditure
  4. Purchasing or inheriting items such as antiques/jewellery/art
  5. Your property has been renovated or you have installed new 'eco-friendly' features.
  6. The value of your property is based on developer's costs that have been index linked over time (developer costs can be much lower than one-off rebuilding costs due to economies of scale at the time of build).
  7. You have not factored in costs such as professional fees, site clearance or access – particularly where you may need specialist plant to help with remedial work as a result of a claim.
  8. Any jewellery/watches/art/specie items have not been professionally appraised in the last 5 years (the cost of precious metals/stones and prestige watches have increased in recent years so the original purchase cost may not be representative of replacement today)
  9. You haven’t considered all items that would be deemed contents
  • Clothes
  • Kitchen goods (oven, washing machine, fridge or expensive cooking gadgets)
  • Carpets, rugs or wooden floors
  • Children’s toys
  • Crockery
  • Items in the loft, garden or garage including cycles
  1. External works should also be considered including landscaping, fencing, patios/decking, garden furniture and garden ornaments/installations

How we can help

Our team of personal insurance experts work with clients from entrepreneurs, company directors through to family offices. We provide a complimentary audit of your insurance needs; help you evaluate your total risk needs and negotiate bespoke solutions from specialist underwriters. This is delivered by a team of dedicated Private Client specialists who champion a concierge led service.

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