Millions of Homeowners Under-Valuing Possessions and Under-Insured by £85,000 on Average

Research by Britain's biggest insurer, Norwich Union, found that 100 of its high net worth customers were under-insured by a total of £8.5m. According to the insurer, this equates to an average under-insurance of £85,000 per household. The insurer is now offering free wealth checks to help homeowners determine the value of their possessions and ensure they have adequate insurance cover. A recent burglary experienced by a Surrey homeowner highlighted the importance of having the right insurance cover, with the claim being handled efficiently by high net worth specialist Hiscox.

Key Takeaways:

• Norwich Union research found that 100 high net worth customers were under-insured by £8.5m, with an average under-insurance of £85,000 per household.
• High net worth policies provide cover on a worldwide all risks basis, whereas standard policies tend to offer only "specified perils" cover.
• Specialist insurers, such as Hiscox and Chubb, do not include "averaging" clauses in their policies, which can reduce claims by the proportion of under-insurance.
• High net worth policies often have minimum sum assureds for contents of £50,000 and buildings of £150,000, compared to standard policies which provide cover on a "per bedroom" basis with a standard contents sum assured of around £30,000.
• Homeowners on high net worth policies may pay lower premiums, such as £1,300 per year for £200,000 contents cover, compared to standard policies which can cost £1,750-£2,000 per year.

Statistics:

• 2.8m potential high net worth customers in the UK, with only a fifth of them (560,000) on the insurers' books in high net worth policies (Hiscox).
• £8.5m total under-insurance amongst 100 high net worth customers (Norwich Union).
• £85,000 average under-insurance per household amongst high net worth customers (Norwich Union).
• £50,000 minimum sum assured for contents on high net worth policies (insurers).
• £150,000 minimum sum assured for buildings on high net worth policies (insurers).
• £30,000 standard contents sum assured on standard policies (insurers).
• £1,300 average premium per year for £200,000 contents cover on high net worth policies (Nigel Wembridge, Norwich Union).
• £1,750-£2,000 average premium per year for standard policies (insurers).

Sources:

• Norwich Union
• Hiscox
• Chubb
• Royal & SunAlliance
• Home & Legacy
• Axa
• The Times (newspaper)