Are your precious possessions protected against fire, theft and damage? Exclusive research for The Telegraph suggests that a quarter of those who have home insurance are underestimating how much their home contents are worth, while one in five of us has no home contents insurance at all.
The figures, from Direct Line, show that 6.8 million British households are underinsured, with £200bn of home contents at risk in total. The recent rise in VAT has caused further problems, since it will cost households a further 2.5pc of the value of the contents lost to replace them.
According to Parago Home, which has just launched an iPhone application that allows you to record the true value of your possessions, the items mostly commonly forgotten when valuing home contents are carpets, curtains, garden tools, expensive cookware and wardrobe contents.
"The average working person's wardrobe contents are worth £10,000," said Parago's founder, Tim Roots. "We need to start recognising that the total value of home contents insurance should cover not only the obvious audio equipment and expensive jewellery, but also the contents of our wardrobes, our children's toys and home furnishings like carpets, curtains and valuable artwork."
He said many people did not know that, if their insurer realises that they are underinsured, it will pay only the corresponding percentage of the claim in the event of a disaster.
On average, every household in Britain is unwittingly underinsured by 30pc on their home contents policy, "with the majority discovering the shortfall only when they make an insurance claim, at which point it is too late to rectify", Mr Roots said.
According to Direct Line, the average British household contains £4,000 worth of furniture, as well as £3,000 worth of electrical items, £2,000 worth of white goods, £1,800 worth of jewellery and almost worth £1,000 of curtains. A further £1,200 worth of items is found in the garage and garden.
"Unfortunately, it is far too easy to turn a blind eye to the true value of your home's contents and grossly underestimate the level at which your insurance should be set – thereby putting your belongings at risk," said Andrew Morrell, the head of home insurance at Direct Line.
Julie Owens, the head of home insurance at price comparison website Moneysupermarket.com, said some insurers used a clause called "condition of average", which means that a claimant will never get the amount of cover stated on their policy if they have underestimated how much their possessions are worth.
For example, if you have £25,000 of home contents cover, but your possessions are actually worth £50,000, you may only receive half of any claim you make on that insurance, even if the amount you are claiming for is less than £25,000.
"Many insurance companies have this," Ms Owens said, adding that the main insurers not to apply this clause are the Co-operative, Halifax and Lloyds TSB. Insurers use loss adjusters to calculate the value of your possessions when you make the claim, at which point it is too late to get adequate insurance.
Price comparison sites, which are used by many people to buy home and building insurance, do not have a default option for the amount of contents cover consumers should have. However, Ms Owens said the Moneysupermarket site suggested an average value of about £40,000 to policyholders. She also suggested that applicants use an internet tool to help calculate the value of their home contents. You can find such tools at www.moneysupermarket.com/home-insurance/calculator and on the AA's website via www.tinyurl.com/486zvbz.
According to the statistics from Direct Line, 40pc of those with insurance did not adjusted it when they inherited heirlooms such as jewellery, furniture and antiques. Ms Owens said that, if these were valuable, home owners would have to look at the limits on covering an individual item as well. Some policies will only pay a maximum of £1,000 per item, which is not always enough, she said.
She suggested that policyholders who did not know what their items were worth should consider a blanket policy with unlimited contents cover, which might not work out much more expensive. For example, a 40-year-old male teacher in Manchester with five years of no claims discount would pay £65.57 a year to insure his home contents for £40,000 with Legal & General. In contrast, he would pay £67.32 for unlimited cover with Bank of Scotland or £79.92 with Halifax, according to Moneysupermarket.
Mike Powell of Defaqto, which provides star ratings for insurance policies, said customers should look at products' features to make sure the policy they're looking at meets their needs. "Underinsurance is a potential risk when people focus on price and not the features or cover they are buying," he said.
How to Make Sure You're Covered
~ Do not be tempted to underinsure. Even if you don't think thieves will want to steal your things, insurance covers flooding and fire, which could destroy everything you own.
~ Check the definition of contents and buildings – your carpets and garden contents can be counted under your policy.
~ Read the small print. Does the policy have a ''condition of average'' clause that means that underinsurance will seriously count against you? How about a single item limit that is lower than you need? Do valuable items need specifying separately and what happens with things that are taken outside the home? Check the policy suits your needs.
~ Use an insurance tool such as the ones specified above. These will ensure you don't forget vital items such as hi-tech sportswear, expensive musical instruments or items that are stored in the loft.
~ Remember that you need to look at the cost of replacing items new, rather than what you paid for them several years ago.
~ If you've inherited heirlooms that may be valuable, Miller's Antiques offers a good way of checking what they may be worth. Registration is free on www.millersantiquesguide.com. If you're still confused you may need to talk to a dealer or valuer.
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