Think insurance will cover you if disaster strikes? Half of us could be in for a shock

If the value of your belongings has increased in the past few years - you may not be covered

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You'd be forgiven for not giving your home insurance much thought - it's one of the reasons why a quarter of us have just let our insurance roll over with the same company for the past five years - and 13% have stuck with the same provider for a decade. We may be paying over the odds by taking this approach, but at least we're covered if the worst comes to the worst. Or are we?

Research from GoCompare warns that we're not just risking a rip off by letting our home insurance automatically renew with our current insurer. There's also a good chance that we're not paying any attention to the sum insured either - and this can be incredibly dangerous.

Inflation

Less than half of all policies increase the sum insured each year in line with inflation. Even if they do, there's every chance that the value of your belongings is increasing faster than this.

Ben Wilson from Gocompare.com Home Insurance explains: "Over the last decade or so, the nature and value of our home's contents has changed. One major change has been in the amount and value of technology and entertainment systems we now have in our homes – from computers, ipads and laptops to home theatre systems and online gaming systems. Now, instead of just one telly in the corner of the lounge, it's not unusual for homes to have a number of TV sets throughout the house."

It means that letting your policy roll over for one year - let alone five or ten - means you run the risk of being underinsured.
Why does this matter?

In the best case scenario, if your insurer thinks your level of cover doesn't reflect the value of your belongings, they will use what's known as the average clause - and reduce any payout in proportion to how underinsured you are.

So, for example, if you have £30,000 of cover, but the true value of your belongings is £60,000, the policy only covers 50% of the value, so the insurer would only pay 50% of any claim. If you had a house fire, and £10,000 of damage was done to the contents, you'd only get £5,000 - and would have to find the other £5,000 yourself.

In the worst case, if your insurer thinks you have deliberately underestimated the value of your belongings, they can cancel the policy entirely, and you will receive nothing.

What can you do?

Wilson says it's essential to assess the collective value of your possessions on a regular basis. By far the most accurate way of doing this is to walk round your property with a clipboard, write down everything of value that you own, and then work out what each item would cost to replace. Don't forget, you'll also need to include everything from furniture to floor coverings, the contents of the loft, and digital downloads.

The GoCompare site has a contents value calculator - as do a number of insurers - which is a good shortcut if you haven't got the energy for a full assessment.

Alternatively, if you are happy to pay a bit more for peace of mind, you can opt for a policy that offers unlimited cover.

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