…is undervaluing your assets.
When filing a claim, a client may sometimes realise that the “sum insured” is not sufficient to recover the full value of the asset. This is referred to as “under-insurance”. It works in two ways: Either the amount insured on your policy does not represent the real value of your asset being covered, or the value limit of your policy is not substantial enough to meet your present needs. Your insurance policy needs to be as close a representation of your assets’ real value!
Here’s some mistakes you may be making:
- Forgetting to or deciding not to reassess! People are often deterred from revising or increasing the amount insured to reflect a more accurate value because they fear it will also increase their premium.
- Deliberately lowering your sums insured to reduce the insurance premium. This can work against you when filing your claim, and can end up costing you far more in the long run.
- Accrual of possessions: Over time, you buy more stuff that increases the value of the contents in your home, but you forget to add it to your insurance. When adding up the replacement costs of your possessions including your new assets, the total value is usually far more than you initially insured for. Failure to update can leave you unwittingly underinsured.
- Upgrading your assets without updating your policy; increasing your property value through renovation etc. Failing to include these in your Householders policy can lead to underinsurance.
Underinsurance should be avoided at all costs, as it can substantially reduce your insurance pay-out. To find out how you can reduce the risk of underinsuring, keep an eye out for our next post!