Under Insurance

Under-insurance occurs when your insurance cover is less than the actual value of your home, contents, or vehicle. If you’re under-insured, you may receive reduced compensation or even be responsible for uncovered losses after a claim.

How Under-Insurance Happens

• Underestimating the replacement value of your home or belongings
• Not updating your policy after renovations, additions, or major purchases
• Using incorrect valuation methods—such as market value instead of rebuilding cost

Consequences of Being Under-Insured

• Shortened payouts: Claims may be reduced proportionally to the under-insurance percentage
• Out-of-pocket costs: You'll need to cover the difference between the insured and actual loss amount
• Uncovered damage: Partial claims may leave you without funds to fully repair or replace

How Insurers Calculate Under-Insurance

Insurers typically use a pro-rata formula:

(Insured amount ÷ Actual value) × Claim amount = Payout

This means if your cover is only 80% of the true value, your claim payout may also be limited to 80%.

When Under-Insurance Is Most Likely

• After home improvements—without increasing insured value
• Buying high-value items like jewellery, electronics, or collectibles and not updating your contents cover
• During property revaluation when rebuilding costs change due to inflation or construction trends

Preventing Under-Insurance

• Assess true values: Use current building quotes or professional valuations
• Update regularly: Adjust your policy after renovations, purchases, or inflation
• Review contents: Periodically list & value major belongings
• Adjust sums assured: Reflect maintenance, improvements, and asset changes

What to Do If You're Under-Insured

• Contact your insurer or broker to reassess your insured value
• Provide cost estimates and evidence of improved or added assets
• Consider adding a buffer (e.g., 10–20%) to your insured sum to accommodate future changes

Why Being Fully Insured Matters

Proper insurance ensures that you’re fully covered in the event of total loss or damage. Avoid financial surprises and ensure peace of mind by keeping your insurance aligned with the true value of your assets.