Don't make this home insurance mistake

Many homes are underinsured. Make sure yours isn't one of them.

If you’re trying to find ways to save money, I wouldn’t blame you for thinking it’s a good idea not to bother with home contents insurance. After all, it’s not a legal requirement, and if you think it’s unlikely you’ll get burgled or your house will burn down, it can feel like you’re simply pouring money down the drain.

So I wouldn’t blame you for thinking that, but at the same time, I think you’d be making a big mistake.

After all, should the worst happen, you could find yourself paying out a lot more to recover or replace your lost belongings.

However, failing to have a home insurance policy in place isn’t the only mistake you can make. Underinsuring your contents can result in you losing just as much.

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Cut your home insurance costs

Home insurance is an expensive necessity. Find out how you can reduce the cost.

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The facts

Recent research from Direct Line has revealed that on average, a quarter of people with contents cover are underinsured by a staggering £20,000.

Now, that’s a lot of money.

Unfortunately, however, it’s pretty easy to underinsure your belongings - simply because it’s hard to accurately assess how much our possessions are worth. It’s also easy to forget about certain items and exclude them from our calculations.

According to Direct Line, on average, Brits own:

£4,000 furniture
£3,000 electricals and £2,000 white goods
Almost £2,000 in clothes
£1,800 in jewellery
£1,700 in carpets and rugs, and almost £1,000 of curtains and blinds
£1,200 garden and garage items.

Some of the items in this list are also the ones we tend to forget about when we’re applying for home insurance. Indeed, according to additional research from Parago Home, the most commonly forgotten items include:

Carpets, home furnishings (cushions) and curtains
Garden tools and equipment (such as lawnmowers, power tools and BBQs)
Expensive cookware (pots and pans, expensive cutlery sets, kitchen gadgets)
Children’s toys
Wardrobe contents.

Don’t make this mistake

The problem with underinsuring your contents is that if you did need to make a claim, your insurer may assess your property and only pay out in proportion to what you’re covered for.

If you’re struggling to assess just how much cover you’ll need, don’t panic, because there are various tools which can help you.

For a start, take a look at this clever home contents calculator from NFU Mutual. It guides you through each room in your house, and all you need to do is add in the value of your belongings. It also lists handy tips and hints to make sure you don’t forget anything important.

The Halifax Virtual Home is worth a look too as it’s packed full of tips on how to protect your home and sufficiently cover your belongings.

By using both of these tools, you should be able to work out more accurately how much your possessions are worth and avoid leaving anything out.

Of course, even once you’ve worked out how much your belongings are worth, you should regularly repeat this exercise to ensure this is still the case.

Alternatively, another option is to opt for an insurer that offers unlimited cover – this means you don’t have to specify a limit to the value of your home contents.

John Fitzsimons looks at three easy ways to cut the cost of your home insurance premiums.

Personal possessions

When you come to choosing your home insurance policy, it’s also important to see whether or not your policy includes personal possessions cover.

If it does, your belongings will also be covered outside your home – and if your pockets or handbag are usually stuffed full of gadgets such as iPods, iPhones, iPads and other iGadgets, not forgetting your wallet of course, this cover is well worth having.

Just bear in mind that home insurance policies will usually have what’s known as a single item limit. This means that your valuables will only be covered up to a certain amount – typically around £1,500.

As a result, if you have an item that’s worth more than this limit, you need to get it named separately on your policy. Fail to do so and your insurer won’t pay out if you need to make a claim.

It’s worth noting that some insurers, such as M&S home insurance, offer a higher single item limit – M&S has a limit of £4,000. So as always, make sure you shop around fully before deciding which policy to choose. You can compare the best deals at the lovemoney.com home insurance centre.

Liar liar

Finally, a new report from Legal & General has revealed that almost a third of Brits think it’s acceptable to commit home insurance fraud by exaggerating a house insurance claim – for example, by adding extra items or increasing the value of the amount being claimed.

The main reason for this is because many of us want to keep up with the latest gadgets and technology. So we think that increasing the value of an item we’re claiming for (such as a mobile phone) might mean we get an upgrade to a better model.

But even if you think this is perfectly acceptable, it’s not – it’s completely illegal. And insurance fraud adds an extra £44 to the average UK household’s annual insurance bill.

If you commit insurance fraud and get caught (and don’t think you won’t*), your details will be added to industry-wide databases which could make it difficult for you to obtain insurance and finance in the future. You may also be prosecuted – so don’t do it!

For tips on keeping your home insurance premiums to a minimum, read Eight savvy tips to cut your home insurance.

*Last year, over 2,000 dishonest insurance claims worth more than £16m were detected every week across the industry.

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