House Insurance - Null and Void on under insured

wood1e

Hi,

Can anyone help clear up something? As I have just had a chat with a lady from Tesco Bank, regarding house insurance.

I got a quote from them, and I thought a bit more pricey than the other quotes, but maybe I will get some extra clubcard points! I don't but no matter.

The issue I have never realised before is that on contents insurance if I don't state the correct contents value for the insurance, and my house burns to the ground.

My insurance could be deemed 'null and void'!

Apparently this is true of all house insurance policies!

I always thought that if I insured for say £75,000, and once the loss adjuster/inspector person had costed my contents after this fire.

And they counted up £80,000 worth of contents, then I would only get upto £75,000 and it was my fault for not insuring for the correct amount?

but it appears I was wrong!! And that potentially my whole insurance would be null and void!!

is this correct?

Is this a con? As I would expect to be paid out on the value of what I bought...irrespective of whether I undervalued my contents (as I said earlier that is my fault)

Or am I missing something completely?

Quentin

wood1e wrote: »

.... As I would expect to be paid out on the value of what I bought...irrespective of whether I undervalued my contents (as I said earlier that is my fault)

Or am I missing something completely?

No, your "expectations" were incorrect.

In your scenario though, underinsuring your contents wouldn't impact your buildings insurance, and assuming your house wasn't underinsured your buildings insurance would cover the rebuilding of the house.

Read up on the perils of underinsuring!

wood1e

I am not interested in the re-build as that is unlimited with Tescos. So my 2up2down is more than covered, even if it were gold plated!

What I am interested in is whether under insuring on contents make the whole policy null and void as Tesco states.

is this a insurance market standard or just Tesco Insurance?

Quentin

The "best" case when you underinsure is that after a claim you get a proportional payout.

eg. Contents value is £80,000. You insure for £40,000.

After a claim for £20,000 your insurer will only pay you £10,000 as you underinsured by half the correct value of your contents.

Google "underinsured on contents insurance" to read all about it.

wood1e

Ok thanks for that.

But I am not asking about 'Under insuring' I understand the basic issues pertaining under insuring, that I might only get monies on a 'pro rata' basis of sum insured.

But what I have never come across....

is it an insurance market norm, to state that if i under insure my contents, that on the point of claim, if the loss adjuster believes I need £80,000 worth of contents replaced. But I only have £70,000 worth of cover.

That I won't get a pro rata or even the £70,000...but that my cover will be 'null and void' because I under insured.

And I will get nothing?

InsideInsurance

It would depend on if they believed that you did it by accident or intentionally.

If they believe you have intentionally undervalued your contents then that is fraud and so would void your insurance.

If they accept that you did so accidentally then it will depend on the terms and conditions. Most include a clause of averaging which is what Quentin describes where your settlement is reduced by the same percentage you under insured by. If you are lucky and it doesnt include an averaging clause then you would receive a settlement up to the declared limit.

It is always important to keep up to date on the total value of your contents and remember that it includes EVERYTHING not just things "your bothered about" and everything has to be valued as new on a new for old policy even if you got them secondhand.

wood1e

ok...Thanks.

But Tesco Insurance terms and conditions state it will be 'null and void' (according to the lady I spoke to)

There is no mention of 'pro rata' payout, no mention off 'intentional/unintentional' under valuing.

It is straight forward 'null and void' and they will pay nothing for the contents.... As we were only talking about contents and not re-build, I presume the re-build insurance would not be 'voided'

So what I am trying to find out is this a Tesco policy or an insurance market norm?

On a second yes it does annoy me that if I got the value wrong, they don't pay out up to the value of what I paid....if you buy something one expects to get the value you bought!! But that is another argument and not what I am worried about here.

*Scarlett

It is up to you to ensure that you insure for an adequate sum.

If you underinsure there could be consequences. It will not neccessarily void the whole policy but any claims could be subject to a reduction by the % you have underinsured. Eg you insure your contents for £25k and they are worth £50k, you make a claim for a £500 TV - the insurer may only pay £250 - 50% as this is the amount you are under insured by.

From the insurers point of view, if you had insured for the correct amount the premium may have been higher. Normally a higher level of cover is a higher risk so more expensive.

A policy could be voided if the insurer would not have taken on the risk if they had known the correct facts / values. Eg you take insurance with a mainstream insurer that only offers up to £50k cover and you have £200k contents in your home.

There are calculators eg

http://www.legalandgeneral.com/insurance/insurance-products/home-insurance/contents-calculator/contents-calculator.html

Or alternatively I have seen policies that offer "unlimited cover" if you can't confidently say what you have.

wood1e

I should add that part of the reason I am investigating new house insurance is that my current provider Your Insurance - Allianz is saying I would be high risk if I made a claim on my current insurance and wouldn't re-insure me!!

Apparantly one claim is high risk!

The other issue as with all finance companies these days is they have jacked the price up my £100 compared to a new customer!

TurnUpForTheBooks_2

Yes it is often worth considering one of the "bedroom-rated" policies which offer a blanket limit - in your case you'd be looking for one with a £100,000 limit which is perhaps bordering on what the market interestingly calls a Higher Net Worth targeted product. In actual fact, an established family household full of appliances, gadgets, a lifetimes worth of jewellery acquisitions etc. etc. might easily reach a £100,000 figure on a replacement value basis.

What I will also add as a further warning to those others have mentioned which is the problems thesedays with the inner limits insurers slip in at various levels for "Valuables". Many policies limit the total valuables to £10,000. That isn't very much when you consider a his and her Rolex might swallow that.

You might be in similar underinsurance "trouble" if you had a contents sum insured that was adequate but your total "valuables" were greater than the inner limit you'd missed in the small print.

dacouch

"If your contents total replacement value shown in your schedule is not enough to
replace all the contents in your home with new items of the same quality and type,
we may refuse to pay a contents claim under this policy or only pay part of a claim"

Page 9 http://www.tescobank.com/assets/sections/homeins/pdf/home-insurance-policy-booklet-0813.pdf

Note it says "may" or "only pay a part of a claim"