Insurance 101
Underinsurance: Why it’s important to insure your home contents for the right value
When you insure your home contents for less than what they’re worth, you’ll be left out of pocket when it comes to claiming.
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Loss
Loss, in terms of insurance, is when you (the policyholder) have suffered a financial loss because of something that has happened that is covered by your policy. For example, if you have building insurance and your home burns down or if you have car insurance and you are in an accident, you would have an insurance loss.
Are all losses insured?
In short, no. Not all losses are covered by your insurer. What losses are covered differ from insurer to insurer and it’s usually outlined in the policy wording.
How does my insurer put a value on a loss?
The value that your insurer puts on your loss should be at a level that will put you back into the position you were in before the loss happened. For some losses the process of determining that value is easy. If you crack your windscreen the value of the loss is simply the cost of replacing it. However, if your house is broken into, an assessor will need to determine the cost of replacing the lost items and whether you bought enough cover on your total home contents. If you didn’t buy enough cover the loss will be reduced proportionally (known as the principle of average).
Does my insurer pay for the full loss?
If your claim is valid, your insurer will cover you for the amount that you are insured for (your sum insured), minus your excess (your contribution to each claim).
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