Summary
The internet has shaken up the market for home insurance. But make sure you're fully insured and be realistic

UK House Insurance - The Risk of Under-insurance

By Tim Larden 15/12/05

For many years in the UK, motor insurance has been a competitive marketplace. Consumers have been used to shopping around at renewal time with a host of direct companies available. The internet has further fuelled this change allowing more people to access better information when their policy is due for renewal.

House insurance has until recently been a much more stable financial product. The relative stability of pricing, compared to a very fluctuating motor insurance market, has meant that consumers have stuck with renewals because the pricing has remained static.

However the internet is also encouraging people to shop around for their home insurance too. The good news for the household insurance consumer is that there are savings to be made on your buildings and contents policies from simply shopping around.

Most people while looking for a cheap deal on their policy also consider the exact cover that they need. If you reflect that you need to be able to replace all of your contents at today's shop values, you might find that you need more cover than you originally thought.

Cutting costs by cutting corners can have a serious effect on a house insurance claim. If you are deemed to be under-insured by your home insurance company, they may apply the condition of average.

This works on the basis that if you did not insure for the full value of your belongings, the insurer will pay out only to the sum that you did insure and they will deduct a further payment from the payout equal to the percentage you under-insured.

This might be clearer in an example - Imagine you own £50,000 of contents in your home but choose to insure for just £25,000 because you thought that this was the maximum a thief could get away with. If your home suffered a catastrophic fire and you lost all of your possessions then your insurer could apply the condition of average.

Under this right they can pay out only 50% of the sum insured because that is the value that you under-insured by. In this case they could pay just £12,500 even though you lost £50,000 of your contents.

Insurance companies will always take this on a case-by-case basis but the only way to protect your home contents is to insure properly to the full value.

Tim Larden has worked within UK insurance for many years with both motor and home insurance experience. UK House Insurance from yourhomeinsurance.co.uk aims to provide cheap UK house insurance quotes in the UK. Life insurance

Readers please note : You should undertake your own background checks before taking any action on any aspect mentioned in this article. Where the author has mentioned specific product details or given examples of how companies have reacted to specific situations, these should be correct as far as the author is aware when this article was written. In some cases additional background information not mentioned in the article has been used in obtaining the examples. Some examples or quotes may have been taken from information available in the public domain where all the background details may not be available. Insurers do change policy conditions and underwriting approach. They will view each situation on its own merits.

You should be aware that details of the topics written about within the articles can change. Therefore, always check out the current position before taking any action. You should also check that any action you are considering, or any proposed purchase, is suitable for your personal circumstances.