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Homeowners warned over contents underinsurance

Homeowners warned over contents underinsurance

Category: Home insurance

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Homeowners have been urged to review their home contents policy to avoid the risk of underinsurance.

The call comes from NFU Mutual after the insurer found 65% of homeowners are still estimating the value of their contents.

Although homeowners with a mortgage are required by their provider to take out buildings insurance, home contents cover is an entirely personal choice.

The insurer expressed concern that some homeowners might deliberately underestimate the value of their contents in a bid to reduce their premium and cut back on household expenditure.

However, it warned that those who fail to insure contents for the correct amount could lose out if they need to make a claim.

When a claim is made, providers apply an insurance term known as 'average' or 'underinsurance'.

This means they will reduce the claims payment by the percentage that the contents are underinsured.

Also of concern was that a third of those questioned said they had never amended or reviewed their policy.

"Updating insurance policies on a regular basis means homeowners can be confident they are getting the right level of cover - there's nothing worse than paying for something that won't work when you need it most," said John Kenny, chief claims manager at NFU Mutual.

"Unfortunately, people are unlikely to appreciate the value of insurance cover until they need to make a claim.

"Attempting to reduce insurance premiums by cutting back on the sum insured may seem cost effective at the time, but in the long run it could prove to cost a lot more, particularly in the case of a disaster like a fire or flood."

If you need to review your home insurance policy, or perhaps you're looking to purchase it for the first time, some excellent deals are available at present.

Up to 30% can be saved on Nationwide Home Insurance when buildings and contents cover is bought together – Nationwide customers get an extra 15% off too.

Alternatively, there is a 20% online discount plus three months free cover on Barclays' Home Insurance at present.

It's vital to remember that insurance needs change over time, making it essential that homeowners review the level of cover they need fairly regularly.

Major milestones in life like buying or extending a home, getting married or having a baby could affect the level of cover required, as well as inheriting or purchasing expensive jewellery or electrical equipment.

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Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.