Studies show that between 70% and 75% of the UK’s high net-worth individuals are underinsured*, and with the severity of financial consequences directly related to the value of property and possessions, owners of high net-value homes are at particular risk.
Simon Gubbins, Managing Director at Robison & Co, said: “One of the common pitfalls of High Net Worth (HNW) home insurance policies is underinsurance, and individuals with HNW homes need to be particularly aware of the possible consequences.
Many policyholders make the mistake of assuming insurers will pay out up to the sum insured, but this is not necessarily the case if the insurer deems that the property has been insured under the current reinstatement value. Insurers can apply what is called an ‘average condition’, which will consider the percentage by which the property is underinsured and deduct it from the final pay-out”.
For example, a policyholder insures their home and contents for £800,000. They make a claim for £100,000 following a fire. The loss adjustor determines that the home and contents was actually worth £1m, and therefore that the original policy only related to 80% of the actual value of the property. As such, they will only pay out 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.”
How to Avoid Underinsuring Your High Net Worth Home
If you own a HNW home, assessing how much insurance you need can be complicated and there are a variety of factors to consider, so seeking the advice of a professional is highly advisable.
Points to Consider When Taking Out a High Net Worth Home Insurance Policy
• Do you know the true replacement value of everything you own?
A valuation by a professional will give you a true replacement value of your property and contents. It’s advisable to review this every 3 years.
• Has your home been altered or extended?
Any changes to your home can dramatically affect the costs involved if your home had to be re-built. A professional valuation will help you identify a realistic re-build cost.
• Have you considered all the external features that comprise your home?
Outbuildings, swimming pool, tennis courts, gates and garden features – all of these features hold a value and should be considered in the costs associated with reinstating your home to its original state.
• Is your property listed?
There are many additional and significant costs involved with the repair or re-build of a listed property.
• What about fees?
No major repair work or re-build can happen without the costly involvement of surveyors, architects and engineers and in some circumstances VAT.
• What if site clearance work is required?
Any demolition or site clearance work will require a professional, so costs need to be allocated for this.
How Can Robison & Co Help?
We specialise in HNW Home Insurance policies and know the level of detail and information that is required to make sure your assets are adequately protected. The first step towards a robust HNW Home Insurance policy is an accurate evaluation of your estate and Robison & Co are currently offering a discounted buildings valuation service for HNW homes – regardless of whether you decide to proceed with a policy. We’ll ask the right questions and do all the legwork to minimise your risk and give you the peace of mind that you are not underinsured.
If you would like advice on a High Net Worth Home Insurance policy, could benefit from a review of your current policy, or would like to request a discounted valuation of your high net worth assets, contact Robison & Co on: 01730 265500.
We can offer a range of bespoke insurance services for private clients, including cover for fine arts, collections, listed buildings and valuable motor vehicles. If you’d like information on any of these services, please get in touch.
*70-75% of UK HNW properties are underinsured: 2015 Datamonitor report.