| For many years in the UK, motor insurance has been | | | | Cutting costs by cutting corners can have a serious |
| a competitive marketplace. Consumers have been | | | | effect on a house insurance claim. If you are deemed |
| used to shopping around at renewal time with a host | | | | to be under-insured by your home insurance |
| of direct companies available. The internet has further | | | | company, they may apply the condition of average. |
| fueled this change allowing more people to access | | | | This works on the basis that if you did not insure for |
| better information when their policy is due for | | | | the full value of your belongings, the insurer will pay |
| renewal. | | | | out only to the sum that you did insure and they will |
| House insurance has until recently been a much more | | | | deduct a further payment from the payout equal to |
| stable financial product. The relative stability of pricing, | | | | the percentage you under-insured. |
| compared to a very fluctual motor insurance market, | | | | This might be clearer in an example - Imagine you |
| has meant that consumers have stuck with renewals | | | | own £50,000 of contents in your home but |
| because the pricing has remained static. | | | | choose to insure for just £25,000 because |
| However the internet is also encouraging people to | | | | you thought that this was the maximum a thief could |
| shop around for their home insurance too. The good | | | | get away with. If your home suffered a catastrophic |
| news for the household insurance consumer is that | | | | fire and you lost all of your possessions then your |
| there are savings to be made on your buildings and | | | | insurer could apply the condition of average. |
| contents policies from simply shopping around. | | | | Under this right they can pay out only 50% of the |
| Most people while looking for a cheap deal on their | | | | sum insured because that is the value that you |
| policy also consider the exact cover that they need. | | | | under-insured by. In this case they could pay just |
| If you reflect that you need to be able to replace all | | | | £12,500 even though you lost £50,000 |
| of your contents at today's shop values, you might | | | | of your contents. |
| find that you need more cover than you originally | | | | Insurance companies will always take this on a case |
| thought. If you fail to insure for the full value that | | | | by case basis but the only way to protect your |
| you require, you are 'under-insured' | | | | home contents is to insure properly to the full value. |