When taking out a household insurance policy, you will be asked by the insurer to give a value of the buildings or contents you want to insure. Following a household insurance claim, whether it be fire, water or flood damage, the insurer sometimes decides that this amount (the "sum insured") isn't enough to cover the full value of the claim. This is referred to as "under-insurance".

In the circumstances where you are found to be underinsured for your contents, your insurer may well choose to apply the average to the claim under an average clause. This means that where the sum insured is inadequate, the insurer can reduce its liability for a claim by applying a proportionate approach. In effect, you will find that the total payout will be less than it will cost to replace the items. In some instances, insurers can choose to avoid the policy from inception and cancel it by refunding all premiums paid and can also look to recover any money paid out under previous claims leaving you in a very vulnerable state.

We find more often than not that people are underinsuring the value of the contents in their homes. Electricals, furniture, clothes, footwear, paintings, ornaments, kitchenware... all things that you might not have considered in the total value of your contents. When you sit and go through each room in your house, you may well be surprised at the totals you are looking at. But it's not just the categories mentioned above if you have a garage, have you considered what's in it? Bikes, power tools, gym equipment, white goods... perhaps items for outdoor pursuits like hiking gear? Snowboarding equipment? You probably haven't even considered these items in that total sum.

When you are looking to insure the contents of your home, get a figure in your mind before you ring around asking for quotes. Insurance companies will apply a formula to a home given certain parameters and apply a figure for the total insured. They may well ask you about certain items that may well exceed a certain threshold on the policy Items of high value) but it is your responsibility to make sure that the sum given for your contents is accurate. If you need more cover than they are suggesting then you must inform them of the total you want to insure for.

Consider the following. If your home suddenly lost all the items inside it, what would be the cost to replace them all? This is the figure you should be considering when re-insuring the contents of your property.