Underinsurance is when you insure your property for less than it would cost to replace. It’s one of the most expensive mistakes you can make with insurance.
How Underinsurance Works
| Insured For | Actual Value | Payout on Total Loss |
|---|---|---|
| £100,000 | £200,000 | £50,000 (50% of claim) |
| £300,000 | £400,000 | £75,000 (75% of claim) |
| £150,000 | £150,000 | £150,000 (full claim) |
Most insurers apply “average” — if you’re underinsured, they reduce every claim proportionally.
The Average Clause
| Insured Value | True Value | Claim Amount | Payout |
|---|---|---|---|
| £50,000 | £100,000 (50% under) | £20,000 | £10,000 (50%) |
| £50,000 | £100,000 (50% under) | £5,000 | £2,500 (50%) |
Every claim is reduced by the same percentage.
What People Commonly Underinsure
| Item | Typical Value | Often Insured For |
|---|---|---|
| Living room contents | £10,000 | £3,000 |
| Kitchen contents | £8,000 | £2,000 |
| Electronics | £5,000 | £1,000 |
| Wardrobes | £5,000 | £1,000 |
| Total | £50,000 | £15,000 (70% underinsured) |
How to Calculate Correct Cover
Buildings
| Step | Action |
|---|---|
| 1 | Use the BCIS calculator for rebuild cost |
| 2 | Add professional fees (architect, surveyor) |
| 3 | Add demolition and site clearance |
| 4 | Include outbuildings, walls, fences |
Contents
| Room | Typical Value |
|---|---|
| Living room | £5,000-£15,000 |
| Kitchen | £3,000-£8,000 |
| Each bedroom | £2,000-£5,000 |
| Bathroom | £500-£2,000 |
| Hall/landing | £500-£1,000 |
Walk through each room with a notebook. Total everything.
Items That Add Up
| Category | Typical Omission |
|---|---|
| Clothing and shoes | Often underestimated by £2,000+ |
| Jewellery and watches | Valued items need specifying |
| Kitchen appliances | Fridge, washing machine, oven |
| Electronics | TV, laptop, tablet, phone, console |
| Garden equipment | Bikes, tools, furniture |
| Hobby equipment | Sports gear, musical instruments |
| Books and media | Can total £1,000+ |
The 1-in-10 Check
As a quick rule: if you’d struggle to replace 1 in 10 of your belongings, you’re probably underinsured. Most people are underinsured by 30-50%.
How to Fix Underinsurance
- Do a room-by-room inventory — List everything
- Photograph or video — Visual evidence for claims
- Keep receipts — Proof of value for expensive items
- Review annually — Add new purchases
- Update after Christmas/birthdays — New gifts add up
Bottom Line
Underinsurance is the most common insurance mistake. Most people are underinsured by 30-50%. Do a proper inventory, insure for the full replacement value, and review annually. The few extra pounds in premium is worth the peace of mind that you’ll get paid in full.