HOW MUCH CONTENTS INSURANCE COVER?
Making sure that you are insured for the right amount depends in part on which of the two types of policy you choose.
Sum-insured policies base what you would pay for your insurance on what it would cost you to replace all your possessions (for new-for-old cover) or what they are currently worth (for indemnity cover). This figure is the ‘sum insured’. Unless you have your insurer’s specific agreement to exclude some of your possessions, the sum insured should include everything you own. It is your responsibility to get the sum insured right. If the figure is too low, it will not reflect the true replacement values of your belongings and you will be under-insured – meaning that any claims you make will not be paid in full. If it is too high, you will be over-insured and paying above the odds for your policy: over-valuing your possessions does not mean that you will be able to claim for higher-specification items as the insurer will verify their cost before paying out.
Bedroom-rated policies base what you pay for your insurance on the number of bedrooms in your house. This sort of insurance may not be available if your house has more than certain number of bedrooms (including those that you do not use as bedrooms – a sewing room at the top of the house, for example).
• If a bedroom-rated policy offers unlimited cover, you do not need to know the total value of your possessions and there is no risk of you being under-insured. However, you may still need to calculate the replacement cost of high-risk items.
• If a bedroom-rated policy puts a limit on the amount you are insured for – e.g. £40,000 – you will still need to work out the total value of your possessions to see whether the policy’s limit will provide sufficient cover.
Valuing your possessions
Guarding against under-insurance of your belongings is time-consuming and tedious, but essential if you want to ensure that any claims you make are paid in full. Even if you have decided to buy a bedroom-rated policy with unlimited cover, you will still need to give the insurer a figure for the cost of replacing high-risk items.
The following advice relates to new-for-old cover. The checklist below lists things that are typically considered to be high-risk or high-value items and are usually subject to limits on what will be paid out in the event of a claim. To work out the total value of all your high-risk items, fill in what it would cost to buy replacements for everything applicable. If you do not keep abreast of the prices of electrical goods, find out up-to-date prices for the nearest equivalent of each item on your list, either from advertisements or by going round the shops.
Checklist for high-risk items
Item Cost for replacing as new (£)
DVD / Blueray recorder
Music and cinema Amplifier
Portable DVD player(s)
Personal stereo/ mp3
Personal CD player
Camcorder/ video cameras
Cameras (including separate lenses, flash guns)
Other items made of precious metal
Works of art
Curios and collections (e.g. stamps, coins)
Expensive sports equipment (e.g. golf clubs, skis)
Other valuable items
It is likely that if you ever have to claim for any high-risk items, your insurer will want to see proof that you owned the items before agreeing to pay for a replacement. It could be worth tracking down the receipts for everything you list for or, if you threw the receipts away, taking a photograph and digging out some other form of proof (e.g. a repair bill or any document giving details of the item plus your name and address). You should also note down details of the make, model and serial numbers of items such as videos and cameras. See Home Security
Getting a valuation
For items that you cannot replace as new – antiques and valuable paintings, for example – you may be asked to supply a professional valuation. Contact the Incorporated Society of Valuers and Auctioneers for a list of valuers who will undertake insurance valuations. It is also a good idea to keep photographs (taken from different aspects) of distinctive valuable items. A valuation for insurance purposes represents what you would have to pay to replace lost or stolen items. With antiques, this normally means replacement with another item of a similar style and in a similar condition. Because the insurance value is what you would have to pay to replace your goods, rather than what you could sell them for, the amount will be higher than a sale valuation to take account of dealer margins. For easy-to-replace antiques, collectables and fine art items the insurance valuation is generally at least double the sale value. For rarer or more intricate items, it could be two to four times as much as the sale valuation.
The rest of your belongings
Once you have valued your high-risk belongings, you have a choice: you can give up on the valuing process and buy a bedroom-rated policy with unlimited cover, or you can guess at the value of your possessions and risk being under-insured or you can go through every room in your home – not forgetting the loft, cellar, garage and garden shed – making a list of all your other belongings (including furniture, carpets, rugs, curtains, lamps, ornaments, plants, books, videos, CDs, LPs, tools kitchen equipment, glass-ware, china, cutlery, iron, ironing board and so on) in order to work out what it would cost to replace them; you should do this the same way as for high-risk items. The Association of British Insurers provides a free information sheet entitled Home Contents Insurance which includes a room-by-room checklist.
Even if you buy new-for-old cover, your clothes and household linen – towels, sheets and so on – will always be covered on an indemnity basis which means that, as well as finding out about their replacement value, you need to make a deduction for wear and tear using the following calculation:
Current replacement value x current age of item (in years)
Estimated total life
The sum insured
With a sum-insured policy, to arrive at the total amount you should be insured for add together the total of your high-risk items and the total for the rest of your belongings (after making a deduction for wear and tear for clothes and linen, as above) and round this figure up to the nearest thousand pounds. You must insure all your contents for the right amount – if the total sum is too low, whatever amount the insurer pays out will be scaled down proportionately.