Tips on calculating your home contents insurance

When you are looking to set up your home buildings and contents insurance it is important to take the time to sit down and put together a clear projection on the worth of your contents. All too often people get caught out with the naïve ‘it won’t happen to me’ misconception and take a finger in the air approach. Unfortunately though it can so easily happen to you and once in that situation you don’t want to be caught short with an undervalued contents claim where you are unable to replace many of your possessions.

Our tips can help you to consider each element that needs including as well as pointing out the main areas where people tend to make mistakes.

Work out the value of your home contents

The best approach to this is to sit down and work out the value of contents room by room in your home. Think about appliances, and contents of freezers, furniture, soft furnishings, kitchenware, clothing, DVDs, books, carpets, curtains and blinds. Consider computers, their contents, music downloads, and items such as mobiles, iPads or tablets, and MP3 Players, etc. Any valuables such as jewellery or heirlooms may need to be covered separately at an additional cost if they are over a certain value as many insurers impose a single item limit. It is important to find out what the single item limit is in order to ensure nothing gets missed off, but this is normally somewhere around £1,500. Don’t forget items outside of the home such as gardening equipment and bikes kept in the garage or shed as these will need to be insured too.

Remember you need to value contents as new-for-old

Don’t forget that you need to value your items as if they were purchased new today and therefore consider their replacement cost rather than their current depreciated value. Should you need to make a claim then the contents would be replaced with new items and it therefore needs to be valued on this basis. Often people make the mistake of thinking perhaps either how much an item is worth now or how much you paid for it when you bought it, but these prices often increase over time and a TV, for example, could be anything up to or over 10 years old in some cases.

Avoid underinsurance at all costs

Although you may either mistakenly or intentionally underinsure your household contents, many people do not realise that in the event of a claim this can mean that even if you didn’t lose all your items you would still only be able to replace each item at the percentage reduction in value. For example, a 75% undervaluation in cover overall will only result in a 75% pay out, and whilst it may work out a bit cheaper to take out your policy initially you will certainly feel the difference in the event of a claim.

Remember to re-value at the point of renewal

Your contents insurance will normally automatically revalue in line with the retail price index, however, it is still wise to go through the process again in terms of recalculating your contents value considering any new items that have been added. Certainly if you purchase new expensive items throughout the year then you should ideally add these on at the time to avoid underinsurance.