Homes are un- and under- insured

Updated: 
house in handUninsured victims of burglary are facing an annual bill of £200m, according to research from Clydesdale and Yorkshire Banks. One in four households have no home contents insurance, and one in three have no buildings cover.

More than million households face footing the cost of a burglary themselves. Unfortunately, while there are many renters who should have, and could afford, to buy insurance, for many living on the breadline it is not a serious option. Their priorities must be food and basic amenities.

Responsible insurance

The insurance industry has tried to make insurance accessible. It has developed insurance-with-rent schemes for council and housing association tenants. But the housing staff don't like commercial companies so do not push the service.

The Worshipful Company of Insurers - an industry charity - has commissioned research into what more the industry can do. I was involved in the initial discussions, but I remember Mark Boleat, a former boss of the Association of British Insurers making a valid point.

He had been working with the likes of Citizens Advice and he made clear that when dealing with people in financial difficulties you had to advise them to prioritise their spending and insurance was never going to be high up the list.

Replacement costs

Once in that financial position, the value of most people's possessions was low, there was little worth burglars stealing and a flood or fire would almost certainly result in them being rehoused and re-equipped by a combination of state aid, grants and charity.

But many better off uninsured are plain ignorant. The fact is a flood, fire or burglary is just as likely to affect them as anyone else. Often these days, renters have expensive possessions amounting to many thousands of pounds.

Calculating home contents

As people save for longer to buy their first home a rented flat can easily contain £50,000 of possession or more. Remember: if you have a total loss you will have to replace it all at once at new prices. The value you need to insure is the replacement cost not the price you paid.

That means there are also many people in the UK who are paying for home insurance but would discover they are under-insured because they have under-valued the full replacement costs of everything in their home.

It's not jus the DVDs and iPods. What gets overlooked is the bedding and curtains, kitchen utensils and even the contents of the sock drawer. Insurers reckon wardrobes alone contain much more than most people estimate.

Reduced payouts

The UK insurance industry pays out approximately £3.2bn each year on claims for damage and theft of property, including burglaries, with one in ten households making a claim each year. The average claim is roughly £1,2601, according to the bank.

But insurers can - and do - pay out less than claimed if they can show that a home was uninsured. They are allowed to reduce the payout to the same proportion as you have insured.

So, if your home has £100,000 of contents and you only insure £60,000, when you claim for £1,000 of damage or loss, the insurer can pay just £600.

Buy from a broker

Ignore the Clydesdale and Yorkshire Banks' puff for their own insurance. But do have a rethink about your own home contents and make sure you are adequately insured. Best advice would be to buy from a professional insurance broker who can help get the right cover for your needs.

Links (new windows)
Clydesdale and Yorkshire Banks
Worshipful Company of Insurers
Mark Boleat
British Insurance Brokers' Association

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