There are some people who think that bending the truth a little won’t hurt. Maybe you’re one of these? Maybe you’ve insured an item for less that its true value before, rubbing your hands together in giddy excitement at the thought of saving a little money on the sly. Well, if you are one of those people, now would be a good time to rethink your strategy and put things right before it’s too late, because if the worst should happen, you may end up losing more than you bargained for.
For a start, if you’re under-insured, you’ll have inadequate insurance cover. So, in the event that you need to make a claim, your insurer has every right to declare your policy as void and refund all premiums that have been paid. Bear in mind that your insurer may even decide to recall any monies paid out for any previous claims.
There is also the option for a reduced pay-out if your policy includes something known as an ‘average clause’. This basically means that your insurer has the right to reduce its liability for a claim by applying a proportionate settlement. Therefore, say you insured your house for &100,000, but the cost to rebuild your house is actually &150,000. You’ve effectively only insured two-thirds of the full rebuild cost. If there was a fire, and your repair costs came to &60,000, your insurer would only have to pay out &40,000; two-thirds of the repair fee.
Ensuring that you’re not under-insured is a relatively simple process. Before you’ll be provided with insurance, your insurer will want to know some key details. For example, they will want to know the true cost of replacing the contents within your property, how much it will cost to rebuild your property should the unforeseen happen. Remember, your insurer will rely on the estimates that you give them to determine your cover.
Your home, and its contents, will, in monetary terms, be your most precious assets, so ensure that they are properly covered at all times. If you’re still rubbing your hands together at the thought of saving a few extra pounds, just remember that, if you’re under-insured:
• your claim(s) can be declared void, leaving you financially vulnerable.
• your policy may be cancelled, or an ‘average clause’ invoked, reducing your insurer’s liability for your claim.
If you’re in any doubts, speak to your insurer and make certain that you’ve got the correct cover. It’s recommended, and certainly in your best interests.