Nearly two-thirds of wealthy homeowners lack the proper amount of insurance for their houses and properties, according to industry giant Aviva.
The insurer has found that 65% of its high net worth home customers who had contents and buildings valuations in 2016 were underinsured. Of these clients, contents and buildings were underinsured by an average of 50% of the original sum insured before the valuation.
This means that underinsured homeowners might only receive half the amount of money needed to rebuild and replace their damaged houses and belongings following a fire, Aviva warns.
“There could be serious consequences for those who don’t have the right amount of insurance to properly cover their home and possessions,” said Richard Alger, underwriting manager for Aviva Private Clients.
Alger said the main reasons for undervaluing possessions include inheriting an item without realising its value, not understanding significant market changes and not taking the time to correctly add up the total value.
“Brokers are perfectly positioned to help ensure their clients are correctly covered simply by understanding what they own and whether there have been any recent lifestyle changes - like children moving out or adding an extension to their home,” Alger also said.
Aviva has revealed the following tips for brokers on how to spot underinsurance:
Check the last time the client had a contents, building and jewellery valuation
Ensure outbuildings annexes, lofts, sheds, garages, basements have been included
Check whether valuable individual pieces have been named on the policy and cross-check these against the ‘single-item’ limits. It is common to have engagement rings, necklaces and cufflinks specified.
Understand whether they own collections or ‘passion assets’ such as wine or art which tend to fluctuate in value.
Check whether there has been any recent lifestyle or home changes – children leaving home, parents moving in, extensions etc.
If in doubt, it’s better to be slightly over-insured than underinsured