With inflation rises and an increase in gold prices, NFU Mutual is urging homeowners to review their home contents policy so as to avoid the risk of underinsurance and the hassle a major loss could cause.
Although homeowners with a mortgage are required by their provider to take out buildings insurance, home contents cover is an entirely personal choice. A recent survey conducted by NFU Mutual revealed that 65 per cent of homeowners are still estimating the value of their contents.
As the economic climate remains challenging, NFU Mutual is concerned many homeowners could be tempted to under-estimate the value of their contents in a bid to reduce their premium and cut back on household expenditure.
Homeowners failing to insure contents for the correct amount could lose out if they need to make a claim. When a claim is made the provider will 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.
Worryingly, 32 per cent of respondents to NFU Mutual’s home insurance survey said they had never amended or reviewed their policy. Optimism and apathy are likely to be the main reasons for not reviewing policies regularly as many simply don’t believe they will ever experience a large loss.
Insurance needs change over time so it’s important people review the level of cover they need fairly regularly – at least once a year. Major life events 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.
John Kenny, chief claims manager at NFU Mutual, said: “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.
“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.”
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