One of the fundamentals of strong home insurance is accurate valuations for the property and possessions you want to protect.
The process can seem overwhelming and once addressed, is often left unreviewed for many years. However, the true accuracy of your policy’s sum insured is only tested in the event of a claim – and trying to rectify any issues at that point is often too late.
Appraising the value of the assets you wish to safeguard may not be as daunting as expected; as a consumer, you are protected under The Consumer Insurance Act 2012, which states: a consumer must take reasonable care not to make misrepresentations to the insurer.
If you have taken reasonable steps to appraise the value of your assets, you are therefore unlikely to be judged to have misrepresented, and a claim cannot be denied on this basis. While not all assets need to be appraised professionally, it is important to understand the implications and how your policy may respond in the event of a loss.
The importance of the ‘average clause’
Check whether your policy contains an ‘average clause.’ If it does, this means that if your property is underinsured, the claim will be adjusted in proportion to the amount by which it is underinsured. For example, a £100,000 loss with a sum insured of only £50,000 (50% underinsured) could result in a settlement of just £25,000 (50% of the total amount claimable of £50,000). It is therefore even more vital to have an accurate sum insured if there is an average clause, and, as the policyholder, it is your responsibility to determine this.
Buildings – your most valuable asset
Your home is typically your largest insured asset. If you have an RICS-approved rebuild valuation survey, this provides an excellent foundation to gain an accurate sum insured; some insurers may even offer to arrange one on your behalf.
The true accuracy of your policy’s sum insured is only tested in the event of a claim – and trying to rectify any issues at that point is often too late.
You should also ensure the rebuild cost has been index-linked annually to allow for inflation as this can have a significant impact over time. It is also important to consider any renovations or home improvements undertaken since the survey; you should inform your provider of these to help ensure coverage remains adequate.
A desktop survey can be a cost-effective alternative to a physical survey for obtaining an accurate rebuild figure. These can be purchased online, typically for under £200 depending on the property. A desktop survey is conducted remotely using Land Registry and mapping data.
You should be extremely cautious about relying on estimates from builders, estate agents or other advisors. These more informal opinions can provide a useful steer but offer no protection if your sum insured later proves inadequate. They can often be significantly misrepresentative; it is also important to remember you should be insuring for the rebuild cost of your home, not market value.
Contents – valued on a new-for-old basis
Home contents are insured on a new-for-old basis, meaning a 5-year-old TV should be valued based on the cost of buying a new replacement today. Often the most accurate approach is a full room-by-room inventory. While some have the time and inclination to go through every room and add up all items, many prefer a practical alternative: reviewing two or three key rooms and then extrapolating to establish a reasonable estimate.
A useful sense check is to imagine a total loss, such as from a fire, and consider whether the sum insured would realistically replace all possessions, including clothing and furniture. As a guideline, contents include anything that would fall out of the house if it were turned upside down. Fitted kitchens and built-in elements typically fall under building insurance.
Artwork – often treated separately
Artwork is often separated from general contents cover. Additional covers can apply, such as death of the artist or defective title. If artwork represents more than 10% of your total contents sum insured, insurers may insist on specific listing or separate limits.
You should be extremely cautious about relying on estimates from builders, estate agents or other advisors.
Artwork can be insured based on purchase value, but valuations updated every 3-5 years are recommended. Whilst the accurate value of art can be established after a loss, to make this possible, we recommend keeping photos and descriptions. If you work with an insurance broker, they should be able to help facilitate this for you.
Jewellery and watches – high risk, high sensitivity
Jewellery and watches are among the most expensive items to insure, reflecting their susceptibility to accidental loss, theft, or damage. As such, it is essential to understand the obligations of your insurance contract regarding valuations. Insurers often request valuations every 3-5 years for high-value items, and it is strongly recommended to have an accurate inventory securely stored, along with pictures.
It is also vital to understand the coverage your policy provides. Does it allow for value uplifts depending on market trends? What will your obligations be in the event of a claim? Is there cover for accidental loss and damage? Suffering a loss of an item can be costly and distressing; these items often hold additional sentimental or emotional value.
Regular review is essential
It is recommended that sums insured and valuations are reviewed regularly, particularly following renovations, major purchases or significant changes in property or asset values. Otherwise, you risk paying premiums for a policy that may not fully indemnify you when it matters most. Although reviewing these areas can take time, it is crucial to ensure your insurance policy remains fit for purpose.
Ben Pickles
Head of Art & Private Client, McClarrons Affinity
About McClarrons Affinity
McClarrons Affinity is a division of McClarrons, an independent specialist insurance broker providing bespoke insurance solutions for high-net-worth individuals. The division offers tailored protection for a broad range of high-value assets and lifestyle requirements, including homes, contents, vehicles, and collections.
All views expressed are those of the author and are presented for information purposes only. The information provided in this article is of a general nature and is not a substitute for specific advice about your own circumstances. You are recommended to obtain specific advice from a qualified professional before you take any action or refrain from any action.
