Floods reveal fifth of homes are underinsured

They say that every cloud has a silver lining, but it’s hard to find one in the  storm clouds that have deluged Britain in 2012; officially one of the wettest years on record, according to weathermen.

Despite receiving flood and storm damage claims adding up to billions, the trade body for home insurers says an interesting fact that came out with the wet weather was a fifth of homes were underinsured.

The Association of British Insurers (ABI) explained that millions of householders underestimate the value of their possessions, leaving them sometimes thousands of pounds short of cover at a time when they are faced with massive disruption to their lives and bills for replacing their belongings.

The best way to work out if the sum insured under your home contents policy is enough to cover the value of everything you own is to carry out a painstaking inventory.

This involves going from room to room listing each item and then looking up the replacement value online or in a catalogue.

A quick internet search with throw up lots of free software options and Microsoft list some templates on their Office web site to help.

Also, take some CSI-style photos of collections and valuable items – especially custom-made jewellery that is difficult to replace. Use and L-shaped piece of card marked up as a ruler to give some idea of size and take the picture against a plain background.

Clip a receipt to the photo to help with a claim.

Don’t forget the cash you will get back from the insurer depends on whether your contents policy is ‘new for old’ or ‘indemnity’.

New for old will pay for a replacement item at the current market value, while and indemnity policy will knock off an amount for depreciation or wear-and-tear.

Many insurers offer block cover – for example contents cover up to £50,000 – but you still need to carry out an inventory to make sure the figure is high enough to replace your possessions.

Don’t forget insurers often want valuables listed separately – like an expensive piece of art or jewellery. Valuables are generally possessions worth more than £500.

Collections do not count – although the value of a collection may exceed £500, each item is valued separately.

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