Underinsurance can put your assets and finances at risk. While you might assume your property and contents are fully protected, research shows otherwise: 70% of UK residential properties are underinsured. Albeit this statistic is down from 82% in the previous year, it clearly remains a pertinent issue. In fact, on average, residential buildings are only insured for 52% of their true rebuild cost*.
What is Underinsurance?
Underinsurance occurs when your insurance policy does not provide enough cover to fully reimburse you for your loss. For example, if an item of jewellery is insured for £1,000 and its true value is found to be £4,000 when it comes to making a claim, you would be found to be underinsured by 75%.
Why Underinsurance Matters
Whilst most high value household policies do not have an average clause[1], should your insurer feel a reckless, deliberate, or careless misrepresentation has been made surrounding the value of a property or other insured section they can apply a remedy to the policy. Such remedy could look like them charging an additional premium (to reflect the premium that would have been charged if the item was insured for the correct amount) or potentially voiding the policy in its entirety.
Equally, it is important that the limits of indemnity on your policy are sufficient to cover your property or contents in the event of a total loss. For example, if you have a limit of indemnity of £1m for your home and in the worst-case scenario of a total loss, it is actually going to cost £1.5m to rebuild your property, you will find yourself short of £500,000. As such, whilst the average clause specifically may not apply to your policy, it remains important to ensure you are providing accurate valuations for your property and assets. As the policyholder, it is your responsibility to advise your insurance broker or insurer of an accurate sum insured for your property and/or assets and to keep this up to date.
Common Causes of Underinsurance
- Outdated Valuations: If your home or specified items such as art, watches or jewellery haven’t been revalued recently, your policy may not reflect the current rebuild cost or replacement value. To stay adequately protected, a professional valuation is recommended every 3–5 years (your insurer may provide a more specific timescale for valuations in your policy wording). These can often be carried out remotely, otherwise it might require a face-to-face visit. Depending on the property or item, approved surveys and/or valuations may allow you to benefit from extended replacement cover – a policy feature that covers the full cost of rebuilding your home or replacement of an item even if it exceeds the sum insured, provided you’ve kept your valuation up to date. Equally, for specified items such as jewellery, you may benefit from insurers allowing a 25% uplift (or similar) in value when it comes to a claim if you have had a recent and valid valuation carried out.
- Unreported Renovations: Major upgrades, from luxury kitchens to home cinemas and underground garages, can significantly increase rebuild costs. If these aren’t disclosed to your insurer, your policy won’t reflect your home’s true value so it is important to report works to your broker or insurer.
- Inflation: As inflation drives up construction costs, fixed policy limits can fall behind, effectively reducing your level of protection. While many policies include index linking to adjust for inflation on your rebuild sum insured automatically, this may not always reflect the true cost of rebuilding, especially during periods of sharp or unpredictable price rises. Equally, when it comes to jewellery, stone and metal prices fluctuate regularly, as does the desirability (and therefore price) of watch brands and artists’ work. As already mentioned, regular valuations can assist in giving you the benefit of an allowance for uplift on your insurance policy cover, a professional valuation provides insurers with the confidence to set an accurate sum insured and, in some cases, may allow for an uplift in policy cover to better reflect the true cost of rebuilding or replacing.
- Market Value vs. Rebuild Cost Confusion: When it comes to property, many homeowners don’t understand that they should be selecting their sum insured based on what it would cost to rebuild their property. Whilst relying on market value for your sum insured can sometimes be adequate this should not be used as a rule of thumb. The rebuild cost takes into account the cost of reconstructing the property to its original standard, including things like surveyors’ costs, debris removal, material costs, labour, etc. which can sometimes be more than the market value, particularly where a property is listed, is built with or uses high value and non-standard materials or specialist services are required to support the rebuild, such as architects or planners. As such, it is important property owners consider the rebuild value of the property when selecting the sum insured, rather than relying on market value.
Key Areas Often Affected
1. Structural Coverage: Custom finishes and materials, advanced systems, and architect-designed features need to be accounted for when considering your rebuild cost but can often be overlooked.
2. Contents Coverage: High-net-worth homes often contain expensive collections – art, jewellery, vintage wines, designer fashion items – that standard limits do not adequately protect. Hiscox (2025) has recently warned of increasing underinsurance for luxury wardrobes and personal collections specifically.
3. Outbuildings and Additional Structures: Detached garages, garden rooms, studios, and annexes often need their own valuation; their unique builds can be costly to replace.
4. Alternative Accommodation: For most high-net-worth policies, the cost of alternative accommodation is typically covered up to the building sum insured, making this less of a concern. However, if the sum insured is inaccurate or outdated, even this substantial level of cover may fall short, especially in prime locations where rental costs can be exceptionally high.
How to Protect Your Assets
- Commission a Professional RICS-approved Rebuild Valuation: For your property, this provides an accurate way of determining your home’s true rebuild cost, especially if it is bespoke, historic, or architecturally complex. In some cases, having a RICS-approved rebuild valuation in place may also allow insurers to offer features such as Extended Replacement cover, which can cover the full cost of rebuilding your home even if this exceeds the stated sum insured, subject to policy terms and conditions. We can provide recommendations of reliable, RICS-approved valuers. As a general rule, a RICS-approved rebuild valuation is recommended every 3–5 years, or sooner if significant works have been carried out. If you haven’t had a professional valuation completed within the last three years, it may be worth reviewing whether your current sum insured still reflects today’s rebuild costs.
- Maintain an Itemised Inventory: Catalogue your valuable belongings with clear documentation, including photos, certificates, and up to date valuations, ideally carrying out a valuation every 3-5 years for specified items (or as frequently as your insurer may dictate).In the event of a claim, having photos of your items within the rooms they are kept can also be invaluable; not only to make it easier for you to list your losses but also to help evidence ownership your ownership of them.
- Review Your Policy: Reassess your policy after major purchases or renovations. A quick check-in with your broker or insurance advisor can help to prevent major gaps.
How We Can Help
With proactive planning and the right guidance, underinsurance is entirely avoidable. By working with an independent broker like McClarrons, you gain access to specialist insurers and brokers who understand the complexities of high-value properties and assets.
If you would like a complimentary review of your high-value home insurance, contact our Art & Private Client team at affinity@mcclarroninsurance.com or on 01653 602634.
Is your sum insured up to date?
If you’re unsure whether your current sum insured is still appropriate, we’ve created a short self-assessment quiz to help you understand whether a review may be needed.
You can access the quiz here or speak to a member of our team for guidance.
[1] Average Clause: when this is applied, a claims payout is reduced by the same proportion of the underinsurance itself so, if you have underinsured by 75%, you would only receive 25% of the claim amount as the claim payout is reduced by 75%.
References
Aviva. (2023) Underinsurance – claims examples. Available at: https://www.aviva.co.uk/risksolutions/news-and-insights/underinsurance—claims-examples/ (Accessed: 7 July 2025).
Aviva. (2025) Brokers warn on widespread underinsurance risk – Aviva. Available at: https://www.insurancebusinessmag.com/uk/news/breaking-news/brokers-warn-on-widespread-underinsurance-risk–aviva-538954.aspx (Accessed: 7 July 2025).
Hiscox. (2025) HNW homes at risk from underinsured wardrobes. Available at: https://www.insurancetimes.co.uk/news/hnw-homes-at-risk-from-underinsured-wardrobes/1455403.article (Accessed: 7 July 2025).
Hiscox Group. (2011) A real risk of riches to rags. Available at: https://www.hiscoxgroup.com/news/press-releases/2011/09-05-11-0 (Accessed: 7 July 2025).
*RebuildCostASSESSMENT.com. (2024) Is the tide really turning on buildings underinsurance?. Available at: https://www.rebuildcostassessment.com/post/buildings-underinsurance-annual-infographic-2024 (Accessed: 7 July 2025).
Redwood Business Insurance Services. (2025) Underinsurance: a growing risk for UK property owners. Available at: https://www.redwoodbusiness.com/news/redwood-uk-underinsurance- (Accessed: 7 July 2025).
Published Sep 2025. Updated Jan 2026.
