COMMENT

The Art Of A Successful Insurance Claim

By Neil Faulkner (TMFVertigo)
March 21, 2006

Before joining the Fool last week I spent a few years working in the world of general insurance (i.e. home, travel, motor insurance and so on). So over the next month or so I thought I would cover a variety of insurance topics, to help you assess your own insurance needs. To begin with I'm going to look at household contents.

Check your total sum insured

According to a study by the Centre for Economic and Business Research, a typical household's contents are worth around £44,500. Many of you with 'typical' households will be thinking "Crikey, that much?" The average sum insured is £35,000, which suggests that many of us are under insured by £9,500 (21%).

Now you're thinking, "That's OK, what are the chances of more than £35,000-worth of my belongings being lost, damaged or stolen in one go?" Unfortunately, it doesn't work like that. Home insurers sometimes apply a technique called 'averaging' when settling claims. If they surveyed your home after you made a claim, they could discover that your possessions were worth a lot more than the amount you had them insured for. So if, in a Clouseau-esque moment, you'd dropped your new, £1,000 laptop down the stairs, using the above figures you might get £1,000 less 21%, which means you'd receive less than £800. You could lose hundreds more for stolen jewellery or a damaged plasma screen.

It's amazing how much your household items add up, especially the new gadgets. Do a quick inventory; you'll be surprised how much you own. Don't forget to call your insurer and amend your policy.

A list of typical household items to jog your memory
Clothes
Accessories
Shoes
CDs and DVDs
TVs, video players and DVD players
Music systems
Other geeky modern gadgets
Stamp, coin or medal collections
Antiques and pictures
Jewellery and watches
Furs
Luggage
Sports equipment
Musical instruments
Camping equipment
Photographic equipment
And, if you're a tenant, your fixtures and fittings!

It's important to keep your insurer updated throughout the year. If you buy anything worth over £1,000, or high risk items such as bicycles (which attracts thieves) you must declare them. Failure to disclose these things could, in theory, invalidate your insurance, although generally insurers will just charge you an extra premium rather than refuse to pay. It's best not to rock the boat though.

You can usually find a cheaper deal at renewal by looking elsewhere, but you're even more likely to when your sum insured changes, so get other quotes. And, whilst we're talking about renewal, beware the price of direct debits!

Accidental damage cover and security discounts

Many of us take out additional accidental damage cover. What you may not realise is that the basic policy usually protects some objects from our stupid selves already. Before agreeing to this extra cost, find out what's covered automatically. The less clumsy among you may feel that this is sufficient. At least, if you don't have kids!

Items usually covered in this way are televisions, satellite decoders, audio and video equipment, radios, home computers and video cassette recorders. (Check the exclusions though; you usually can't blame your tail-chasing dog, for example.)

Lastly, if your home is a paranoid's dream-house of locks and alarms, you may have signed up for an extra security discount. Be wary of the small print though: you're not allowed to leave any windows open and unlocked when the house is unoccupied -- even for five minutes!

See our insurance centre for contents insurance, and while you're at it, our mortgage centre could help you save on your home loan.