How to safeguard against home insurance small print: averaging and under-insurance


Home insurers looking to boost business have unwittingly revealed the underhand tactic of ‘averaging’ hidden away in the terms and conditions of many policies.

Insurers are ‘marketing’ home insurance to try and worry homeowners in to upping their home cover by telling them that they underinsure in their most cherished and expensive possessions.

One of the latest strategies is pointing out that the cost of gold and other precious metals is raising at such a rate that valuations on jewellery may well be for far too little.

However, the strategy exposes the scam of an ‘average’ or ‘under-insurance’ clause in home cover policies.

Basically, this legal loophole lets an insurance company pay out less on a claim based on the amount you are under insured.

For instance, if you have contents worth £100,000 damaged or stolen, but they were insured for £75,000, then the insurer will only pay out 75% of the value of each item rather than the full amount.

Insurers claim this clause protects them for sneaky homeowners who under insure their belongings in the expectation their policy will pay out the full amount in the event of a claim.

Unfortunately, most people who under insure and fall victim to this ploy do not have full cover because they genuinely under-estimated the value of the items they insure or just blindly renew their home insurance each year without considering the consequences.

The best way of making sure your home insurance adequately covers the value of your belongings is to carry out a room-by-room inventory.

Think CSI – crime scene investigation – and photograph everything from several angles by a ruler to help with size. Also take a close up of any hallmarks or maker marks etc. These will help you prove you own the item and its true value if you have to make a home insurance claim.

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One Response to How to safeguard against home insurance small print: averaging and under-insurance

  1. I dont think the “average” clause is a “scam” or “legal loophole” somehow…insurance policies are contracts…and this a condition designed to prevent fraud, or insurers paying out more than what they have charged for.

    Insured’s “fall victim to this ploy and do not have full cover because they genuinely under-estimated the value of the items they insure or just blindly renew their home insurance each year without considering the consequences” – if they cannot be bothered to read into the terms of the contract or insure their property for the correct amount, why on earth should an insurer pay £100,000 worth of claim, when they have only collected the premium for £50,000….??

    In some exceptional policies you will find the “accidental exception to insure clause” – which covers the insured against forgetting to advise their insurers of certain items – but an insurer accepts the risk on the basis of the information the insured provides – a contract of trust – to tell the insurer a wrong amount is your own fault and abuse of that trust – in some cases i would even back the insurer for not paying out at all, let alone only paying 50% or whatever the value of the underinsurance is…

    Given that you are an insurance blogger…i would have hoped that you would try to portray the industry in a slightly better light than what you are doing…accusing insurers of a scam for a perfectly legitimate clause in a contract is not partcularly helpful in helping consumers understand how insurance works…

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