Underinsurance applies to your home too

It is estimated that 1 in 5 British homes may be underinsured. Sometimes this is a deliberate act to keep premiums lower and sometimes this is innocent due to a lack of understanding of the issues. Either way, the result could be a claim being rejected by your insurer or settlements being reduced on an accepted claim.

Be clear, that for most home insurance policies the words "sum insured" means the total replacement cost of all your belongings on a new-for-old basis. In the case of your buildings, this is the cost to fully rebuild your house in the event of a total loss. Many people will think about the price they paid for their furniture and other contents and base their valuation on this or consider the market value of their house. These may well not be adequate.

Some insurance policies introduce "inner limits" for certain types of possessions. For instance "valuables" may only be covered up to £10,000 - but what is the definition of valuables? This may vary from insurer to insurer.

Jewellery items particularly would benefit from a regular professional revaluation and claims for single pieces worth more than £5,000 are likely to need a recent valuation to support them. Gold and silver values fluctuate considerably from year to year and so need to be reviewed regularly. The true value of items inherited from family members may not be known and items purchased abroad may be much more expensive if having to be purchased in the UK.

Make sure that the next time you are reviewing your home insurance, you take full advice on whether it is fit for purpose and meets your current needs. Speak to a professional broker who can help you find the right cover for you and avoid the potential pitfalls.