Home insurance 'claims shock' as 92% underinsure

Ninety-two per cent of Britons do not have enough home insurance cover, according to Marks & Spencer Money.

In fact, the majority of UK residents underestimate the value of their home contents by a third - or £10,000 in real terms.

This is a problem as it could affect every single attempt to use the insurance, regardless of the value of individual claims.

"By underinsuring their homes, people are buying partial insurance and as a result any claims they make may not be paid in full or even be refused completely," M&S money said today.

This is due to the "average" or "underinsurance clause" on many policies. This clause means that if a home is insured for just two-thirds of its value, then policyholders could be entitled to just two-thirds of the value of any claim - less any excess.

In what it believes is the first survey of its kind, M&S sent an independent loss assessor to check out the value of the possessions in homes around the country. He then compared his professional valuation with the one the homeowners had produced.

He found that the average self-assessment puts the value of a home's contents at £22,300 - while M&S Money's independent assessor put the value at £32,400.

"People often don't realise that they should estimate the replacement costs of items rather than what they paid for them," explained independent loss assessor Tim Craig.

He continued: "This becomes more complicated with antiques, jewellery and furniture that may cost more to replace over time, whereas other items such as computers and televisions may cost less to replace.

"People also forget to include such everyday items as crockery, cutlery and clothes when estimating the value of their possessions."

Peter Longstaff, head of general insurance at M&S Money, added: "It is unfair to expect anyone to put a price on their possessions. We went into real homes and challenged real people to assess the real value of their contents, and the results were alarming. Some individual households were underinsured by up to 83 per cent."

M&S Money also found that "estimating the value of their contents" was the most hated part of home insurance, however there is a way out.

Companies including More Than, Alliance & Leicester, Zurich, and M&S all offer a minimum level of cover above the average valuation of £32,400 - removing the need for policyholders to assess the value of contents themselves.

See the MyFinances home insurance page for details of policies from some of the top insurance providers on the net.