Using the wrong value
Buildings insurance is often based on rebuild value, not the price your home would sell for.
Home Insurance Guide
Underinsurance explained (and how to avoid it).
Underinsurance happens when your buildings or contents cover isn’t high enough to reflect the real value of what you’re insuring. It can affect claim payouts and leave you paying more than expected.
- âś” What underinsurance is
- ✔ Why it’s common
- âś” Simple checklist to reduce the risk
In plain English
If the true cost of a loss is higher than your cover limit (your sum insured), your insurer may not pay the full amount. The exact outcome depends on the policy wording and claim type.
- Buildings underinsurance often comes from confusing rebuild value with market value
- Contents underinsurance often comes from underestimating replacement costs
- Single-item limits for valuables can cause surprises
Why underinsurance happens
Usually it’s accidental — and very common.
Forgetting renovation costs
Extensions, loft conversions and kitchen upgrades increase rebuild/replacement value.
Underestimating contents
People forget wardrobes, shoes, kitchen items, tools, and tech add up quickly.
Valuables not specified
Jewellery, watches and bikes may need to be listed separately above a certain value.
High-value items guide →How it can affect claims
The exact outcome depends on the insurer and policy terms.
Two common outcomes
Policies may limit payout to the stated sum insured, and some policies may reduce payouts if they determine the home or contents were underinsured. Always check the provider’s wording.
- Claims may be capped by your sum insured
- Some policies may apply proportionate settlement rules
- Excess still applies to many claims
Checklist: reduce underinsurance risk
A practical, low-effort checklist.
Buildings (rebuild value)
- Use rebuild guidance — not sale price
- Include professional fees and removal costs if needed
- Update cover after renovations
Contents (replacement value)
- Estimate replacement cost, not what you paid
- Don’t forget wardrobes, kitchen items, and tools
- Review annually (birthdays, upgrades, gadgets)
Valuables
- Check single-item limits
- Specify high-value items where required
- Keep receipts/photos where possible
Compare like-for-like
- Match sums insured across quotes
- Compare excess amounts
- Check accidental damage options
Next reading
Continue building your home insurance knowledge.
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