Contents Insurance: Whatever You Do, Don’t Under-Insure

Miss Thrifty9 February 18, 2013

contents insurance claim tips


Have you taken out contents insurance? Did you know that “under-insurance” is so widespread that, according to one survey, it affects up to half of insurance customers  who make a claim?

When you under-insure, the cover you take out is less than your possessions, including your valuables, are worth. For example, you may take out £10,000 worth of cover when the contents of your property are worth £20,000. This may be because you want to keep your premiums low – or simply because you have under-estimated the value of all that you own. It’s easily done.

Now you might think that this shouldn’t be the end of the world. If worst came to worst, you could only claim up to £10,000, right? Uh… no. It appears that if you under-insure, your insurer only has to pay out 50% of any claim – even if that claim is for a few hundred pounds.

And there’s more. The worst case scenario isn’t claiming £10,000 instead of £20,000. It is having your insurer tear up your policy and refuse to pay you anything. This is what recently happened to the Cade family, who had £27,000 worth of watches, jewellery and gadgets stolen during a burglary at their home in Marlow, Bucks. When they submitted an insurance claim (to an insurance company I’ve never heard of; the Cades found it on a comparison site), the company cancelled their policy and, instead of paying out, refunded their premiums instead.

The company wrote to the Cades with the following explanation:

“As a result of our investigations, certain facts have emerged which have caused underwriters to void your policy of insurance on the grounds of material non-disclosure and misrepresentations made by you. The result of this voidance is that the policy does not and has not existed, and therefore no claims are payable under it.”

On the face of it, the Cades weren’t even under-insured. Their contents insurance was for £50,000, and their claim was for £27,000. However the small print for their policy specified that the valuables in their home should account for no more than a third of the total cover: £16,667.

It should be noted that this isn’t regular industry practice. Apparently most insurance companies will pay a proportion of your claim if you find yourself in this situation.It is a cautionary tale though, isn’t it?  Not only have the Cades lost £27,000 of valuables, but they have also to pay an additional repair bill of £4,000. They have complained to the Financial Ombudsman, but a decision about their case hasn’t yet been made.

There are two morals to this story. The first one is the obvious one: read the small print. If you take out a policy online, as so many of us do now, it’s all too easy to tick the box saying that you agree to the terms of your new policy, without bothering to scroll all the way to the bottom while reading those terms and conditions carefully. Don’t fall into that trap. Read the small print.

The second moral to this story? It’s doom-laden, but it’s a must-do. Before hammering the comparison sites to get the best possible deal for your annual contents insurance, take some time out. Sit down and list the value of everything in your property that you would need to replace if a fire razed your house to the ground tomorrow. Yes: we’re talking about what you would need to buy if you lost everything. Don’t stop at the contents of your jewellery box, or your TV, or your computer. What about your carpets? Your curtains? Your books? Your white goods? Your pots and pans? Your lawnmower? Your children’s toys? Even your lightshades would need replacing.

Many of these items aren’t worth a lot on the face of it, but if you lost them tomorrow, could you afford to replace them all?

As a guide, here are the values of the possessions owned by the average British household:

  • £4,000 – furniture
  • £3,000 – electricals
  • £2,000 – white goods
  • Almost £2,000 – clothes
  • £1,800 – jewellery
  • £1,700 – carpets and rugs
  • Almost £1,000 – curtains and blinds
  • £1,200 -garden and garage items.


I suspect that one reason why under-insurance is so common is that when you don’t have them all set down in a list in front of you, it is easy to under-estimate your worldly possessions –  both the quantity and the value. 

This post was brought to you in association with Miss Thrifty partner Endsleigh Insurance (

Image credit: The Library of Congress.

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9 Responses to “Contents Insurance: Whatever You Do, Don’t Under-Insure

Mevsim Gelisiguzel says:

Not bringing a tale of woe, but checking your life insurance is also important because you really can’t predict what’s around the corner. After moving to a larger house, we hadn’t got round to increasing our life policies to accommodate the bigger mortgage. I lost my husband suddenly in his mid-thirties and you can guess that our mortgages weren’t covered. I was young enough to keep working for this not to be disastrous but if you are older or have children young enough to need childcare this could put immense pressure on a family.

February 19, 2013 at 10:32 am

Very interesting article from the British perspective. Not sure the Cade’s case would fly under US law, but your points are well taken and equally applicable here in America. Underinsurance is a real problem and care needs to taken in getting correct coverage.

February 19, 2013 at 3:10 pm

To follow up on Mevsim’s comments having your estate plan, wills, trusts, durable power of attorney and beneficiary designations up to date would also be prudent. For those US readers there is a reference below to my article that explores the estate planning issues for 2013 and beyond.

February 19, 2013 at 7:44 pm

Naiomi says:

Made this mistake 10 years ago when my shed’s were broken in to my contents for whole house was around £10.000-£12,000. Over £3000 of items went and only paid out £600. The inspecter said I know you don’t want to but think if your house burnt to the ground and you had to replace every single item from big peices to a needle pack and thed what would it cost, By the time i went around with a pen & paper just the 3 peice suit , television,washer,cooker,fridge freezer, Sterio, dvd player Came to over £7,000 aloane im contents now is for over £60,000!

February 20, 2013 at 12:14 am

I agree, when we moved here our insurance premium soared and it gave our financial adviser a real headache trying to find insurance for us, but we had recently purchased a new bed, sofas etc.
However with car insurance, I think, the opposite is often true with people forgetting to adjust for the decreasing value of the car each year and thereby over insuring. After an accident Insurance companies will only pay out on the value of the car at that point not as it was when you first bought it.

February 21, 2013 at 7:10 pm

I guess its better to be safe than sorry.

February 28, 2013 at 11:36 pm

I have to say that the whole under-insurance clause in home insurance policies is a complete farce! We went on holiday last October and arrived home at 1.00am to find that we had been burgled whilst we were away. Fortunately for us, they only took small items of jewellery.

But i felt like i’d been robbed a second time after i’d spoken with our insurance comapnies loss adjuster! Insurance companies want to pay out as little as possible – their whole business model is based on them paying out less than what they make, collectively, from insurance policies sold.

March 14, 2013 at 11:35 pm

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