Black Friday is one of the biggest shopping days of the year, with UK consumers expected to spend a massive £4.7 billion on deals and discounts this year. However, consumers need to consider the impact of Black Friday spending sprees on their household contents value, and in particular the dangers of underinsurance.
Simon Gubbins, Managing Director at Robison & Co., said: “The average UK household contents is valued at £35,000, yet 1 in 4 homes do not have contents insurance and of those who have purchased contents policies, over half are underinsured. This is particularly true of high value home insurance policies, where the risks of underinsurance are even greater.
Some of the most popular items purchased on Black Friday include games consoles, TVs, iPads, sound systems, hoovers and high-end kitchen equipment – items which collectively contribute considerably to the value of your home contents, so your home insurance policies need to be amended accordingly. This is also true of high value purchases made throughout the year. If you knowingly or unknowingly fall into the trap of underinsurance, you could run the risk of severe financial penalties in the event of a claim.”
Underinsurance is a growing problem in the UK, as consumers take an increasingly relaxed approach to purchasing policies. Online comparison sites make it possible to purchase almost any kind of insurance policy without taking any form of professional advice, and it has been revealed that 50% of policyholders provide a rough estimated value for their possessions when taking out home contents insurance, with some decreasing the value to reduce the overall premium.
Simon continued: “Underinsurance is a serious problem in the UK, particularly with owners of high net worth properties. Many policyholders assume insurers will pay up to the sum insured. However, if the insurer deems that the property has been insured below the reinstatement value, they can apply an ‘average’ condition, which will consider the percentage by which the property is underinsured and reduce the settlement proportionately”.
For example, if a policyholder insures their home and contents for £800,000 and subsequently makes a claim for £100,000, their insurer may determine the true reinstatement value at £1m, meaning that the original policy only related to 80% of the actual value of the property. As such, they would only settle in respect of 80% of the claim – in this example, £80,000 rather than the full claim value of £100,000.
Simon continued: “While underinsurance is a frightening prospect, it is an easy trap to fall into without the right professional advice. Our advice to consumers is that they should be as diligent with shopping for their home insurance as they are with finding the best Black Friday deals! Don’t risk falling into the underinsurance trap and take some professional advice for the peace of mind that you will be adequately compensated in the event of a claim.”
Robison & Co is an owner-managed insurance brokerage, offering advice on all areas of business and personal insurance, as well as independent financial advice on investments, mortgages and pensions.
If you’d like further information with regard to high net worth homes and how to avoid underinsurance, see our blog: Is Your Home and It’s Contents Underinsured