What is underinsurance? And how can you avoid the consequences?
Wealthy households and high net worth individuals are at far greater risk of underinsurance.
In our experience, this happens because they need to take far more factors into account than a standard insurance policyholder.
The aim of this article is to help you discover…
- The definition of underinsurance and why it occurs
- The most common underinsured categories
- How to assess the level of insurance cover you actually need
- Actionable steps you can take to properly protect belongings
What is underinsurance?
When you arrange insurance, your premium (the amount you pay) is calculated based on your individual circumstances and the amount of cover you tell your insurer that’s needed. Underinsurance occurs when you don’t take out enough insurance cover to meet your needs.
Unfortunately, the financial impact of underinsurance increases in line with the number of possessions you have – and their current market value.
What are the most common underinsured categories?
According to a DataMonitor report issued in 2015, between 70 to 80% of the UK’s high net worth individuals are underinsured.
The most commonly underinsured categories:
- Carpets and curtains
- Kitchen equipment
- Wine and spirits
What level of insurance cover do you actually need?
Being underinsured is a common issue for people who own items which are likely to rise in value – such as jewellery, watches, art, wine, classic cars or collectables.
In the last five years, the following collectables have enjoyed the largest leaps in value:
- Coins and medals
- 1950/60s post-war furniture
- Topographical books
- 20th-century British art
- Modern first editions
If you own any items which could appreciate in value (including heirlooms and antiques), your insurance needs to reflect their current-day replacement cost – not the purchase cost or an historic valuation.
What action can I take to achieve full peace of mind?
At Nowell & Richards, we believe there are 3 simple steps you can take to avoid the pitfalls of underinsurance…
Update your insurance broker when you make a sizeable purchase: All N&R policies have 90 days cover as standard (in case you forget).
Set aside plenty of time for your annual insurance renewal: This is the perfect chance to discuss any purchases, disposals or changes in your circumstances.
Arrange for regular asset valuations: Every 1 to 3 years should be considered depending on your buying habits and circumstances.
If you’d like to reduce your exposure to risk and underinsurance, we can help you get the right cover in place.
For unrivalled impartial advice, experience and expertise – call our specialist Private Clients insurance team on 01785 255514 to discuss your options.