Until the day comes that you need to make a major insurance claim, you will probably never worry about the term ‘underinsurance’. Sadly though, if you are under-insured and you have to make a claim this can have a devastating impact on your settlement and even put your whole claim at risk, and here’s why:
If you estimate the cost to rebuild your house would be £200,000 but when you come to make a claim, the insurance company value the rebuild at £300,000, you are under-insured by approximately 44%.
If you find you need to make an insurance claim and the cost of that claim comes to £100,000 you might believe you are adequately insured as you have your insurance value set at £200,000, however this is not the case.
Your insurer will argue that you are 44% under-insured and they will therefore only pay 66% of the value of the claim – £66,000 because you have only been paying 66% of your correct premiums.
In the worst cases of underinsurance, claims can be refused completely because the underinsurance is so severe.
Underinsurance is such a common problem nowadays as so many people use comparison sites to buy their insurance and they underestimate the value of their homes and businesses. At Morgan Clark, we would always recommend over-estimating the value of your home or business, you can even buy ‘unlimited’ cover which would ensure you were never under-insured. Another choice is to go through an Insurance Broker to set up your insurance.
If, however, you find yourself having to make a claim and you are concerned you might be underinsured, our insurance claim specialists are here to give you advice seven days a week, so don’t hesitate to get in touch.