Insurance can help you protect your home and belongings. But many people don’t realise they might be underinsured - which can lead to financial stress if disaster strikes.
At AXA, we’re committed to helping you understand your insurance needs so you can enjoy peace of mind. Let’s explore how to avoid underinsurance and get the protection you need.
- What is underinsurance?
- What does ‘sum insured’ mean?
- What happens if I’m underinsured?
- How can I avoid being underinsured?
- What should I do if I think I might be underinsured?
What is underinsurance?
Underinsurance happens when you’ve got insurance, but the cover doesn’t go far enough to protect what you own.
Underinsurance can happen if you’ve not worked out how much it would cost to replace your items, or rebuild your home if something major happened. So, if you’ve insured your contents for £30,000 but it would actually cost £40,000 to replace or repair your items after a fire or flood, you’re underinsured.
The amount you need to be insured for will depend on a few factors. But you’ll need to make sure that:
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Buildings insurance
You should be insured for the amount it would cost to rebuild your home, its outbuildings, and garage, if they were completely destroyed. This isn’t necessarily how much you paid for the house, or how much you would sell it for.
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Contents insurance
You should be insured for the amount it would cost to replace your contents as new, if they were destroyed or stolen.
If you’ve already got insurance, it’s important to tell your insurer about any big changes to avoid becoming underinsured. If you’ve got buildings insurance, a new extension could increase your rebuild costs. New tech, jewellery, bikes and musical instruments should be added to your contents insurance, too.
With most AXA home insurance products1, items valued at more than £1,500 will need to be specified on your policy if you want them fully covered. That way your higher risk items can be protected both at home, and away.
Your insurer should tell you if you’re trying to insure an item whose value is higher than the limits of the insurance policy. You shouldn’t be sold a policy that doesn’t fit your insurance needs.
What does ‘sum insured’ mean?
You might see the term ‘sum insured’, but what does that mean? Sum insured is the maximum amount your insurance company will pay if you make a valid claim.
To make sure you’re not underinsured, your sum insured should reflect the amount of money it would take to completely rebuild the buildings, or replace the contents you want covered.
What happens if I’m underinsured?
So you need to make a claim on your AXA home insurance, but you’re underinsured. Your policy wording explains what we’ll do to make sure you have the best outcome possible – which will usually mean paying your claim up to your policy limit.
In extreme cases where you’re significantly underinsured, we may:
- Reduce how much we’ll pay towards your claim,
- Refuse to pay anything towards your claim,
- Cancel your policy.
How can I avoid being underinsured?
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Use our contents calculator for your contents insurance.
To help you make sure you’re properly covered, we’ve made a contents calculator. Follow the simple steps and use the dropdown boxes to get a clear idea of how much your contents are worth.
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Check out the Association of British Insurers’ rebuilding cost calculator.
Whilst not as accurate as a proper survey, the ABI’s rebuilding cost calculator can help you get an idea of how much it would cost to rebuild your home, and how much buildings insurance you’ll need.
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Get in touch with your insurer when you buy big ticket times.
Bicycles, jewellery and watches, lawnmowers and musical instruments might all cost more to replace than the limits on your policy. You might need to buy some additional cover to make sure these items are protected.
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When it’s time to renew, it’s time to recalculate.
Each year, you’ll need to check your insurance still covers everything it needs to. It’s worth taking the time to recalculate, especially if you’ve made some changes in your home over the past year.
What should I do if I think I might be underinsured?
Think you might be underinsured? If your cover isn’t reaching far enough, you might want to compare the benefits of our AXA Plus and AXA Premier products. The increased cover limits could make a world of difference should you need to make a claim.
Get in touch with your insurer to discuss your cover options.
1You must specify any items valued at £1,500 or more with any AXA home insurance policies bought after June 2022. For more information about specified items, visit our HelpHub.
