Underinsurance in home insurance complaints
When you take out home insurance, it’s important to get enough cover. This means you need to give your insurer an accurate figure for the buildings or contents you want to insure. The insurer must ask clear questions to help get this information.
It’s not always straightforward to work out the value of your home or possessions. It’s stressful if you’ve made a claim and your insurer has said you’re underinsured because you underestimated how much things were worth.
Types of complaint we see
People complain to us that their insurer hasn’t asked the right questions. For example, an application form might ask 'how much cover do you need?' This isn't always a straightforward question to answer. What the insurer actually wants to know might be 'what’s the total value of all the items in your home?'
You might end up underinsured if your insurer hasn’t asked the right questions. We see complaints where:
- the insurer didn’t make it clear that the consumer needed to check the accuracy of pre-filled parts of an online form
- the consumer didn’t calculate the sum insured properly, but still wants to claim
You might have something called the ‘average clause’ in your policy. If you do, your insurer might use it to work out a claim. This means you’ll have to pay a proportion of any loss or damage if you’ve insured something for less than its replacement value. The insurer has a formula for working this out. We sometimes see complaints where the insurer has:
- tried to apply the average clause but there’s no average clause in the policy
- applied the average clause but didn’t ask the consumer to estimate the full value of the building or contents
How to complain
Talk to your insurer first so they have the chance to put things right. They have to respond within eight weeks. If they don’t respond, or you’re not happy with their response, let us know.
Bringing a complaint to us is straightforward and won’t cost you anything. We’ll check if your complaint is something we can deal with, and if it is, we’ll investigate.
Read more about how to complain.
What we look at
We look at lots of things when we consider complaints about underinsurance. Before you buy home insurance cover, the insurer needs to know the cost of:
- rebuilding your home
- replacing your contents
- rebuilding your home and replacing your contents
Consumers aren’t usually experienced in calculating these things. We’ll bear this in mind when we look at your complaint.
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We’ll look at what the insurer asked you when you took out the policy. We’ll make sure that the way the insurer communicated was:
- clear
- fair
- not misleading
We’ll look at any additional guidance the insurer gave you when you applied. We’ll ask:
- Has the insurer provided clear descriptions to help you value your contents or estimate your property’s rebuild cost?
- Has the insurer made it clear you needed to calculate the full replacement cost of your contents?
- Has the insurer properly explained what ‘contents’ or 'outbuildings' mean?
- If you applied online, was it easy to do this without having to read any guidance notes?
If the answer to any of these questions is no, we’ll probably say it’s not fair for the insurer to:
- apply the average clause
- cancel (void) your policy
- adjust your claim in other ways
Contents insurance
We’ll check what questions the insurer asked when you took out your policy. They could have asked you to value your contents in different ways, for example by asking:
- What’s the total value of contents at your property?
- How much cover do you need?
- What sum insured do you need?
In these examples, the first question is the clearest. The other two could lead to someone being underinsured because they didn’t understand the question.
Buildings insurance
We’ll check what questions the insurer asked when you took out your policy. They're likely to have asked you about your level of cover. They could ask this question in different ways. For example, the application form could say:
- amount to be insured – buildings
- buildings value – including the rebuilding cost, debris removal, fees and VAT
The second example is clearer. We’ll look at whether the application form clearly asks for the information the insurer wants to know and how helpful it is to you. We’ll check if your insurer has:
- helped you reach an accurate figure, for example by referring to online calculators
- explained what must be included in the rebuild cost
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Calculators can be helpful if you need to work out the cost of your contents or rebuilding your property. But we sometimes see cases where things have gone wrong. For example, sometimes insurers refer consumers to calculators without checking that they’re suitable.
Some calculators have pre-filled fields, which already have amounts for contents or rebuild costs filled in. These are based on answers to questions like ‘how many bedrooms does your property have?’
We’ll make sure that the insurer made it clear you needed to:
- check all pre-filled parts of the form
- make sure the amount on the form would cover the full cost of replacing your contents or rebuilding your home
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You're responsible for giving a reasonable answer to the question you're asked, taking into account any guidance you're given. If you're asked to estimate the value of your contents or rebuild cost, and you don't give reasonable estimates, your insurer could:
- decide not to pay claims out in full
- decline claims
- cancel the policy
If your insurer has taken any of these actions, we'll check if it's acted fairly by looking at:
- the question asked
- the answer you gave
- whether it was reasonable in the circumstances
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If you have an average clause in your policy, your insurer might use it to work out a claim. This means you’ll have to pay a proportion of the replacement or rebuild cost if you’re underinsured.
For example, if the rebuild cost of your home is £400,000 but you valued it at £200,000 in your insurance policy, you are 50% underinsured. If you were to make a claim, some insurers would only pay 50% of your claim and you would have to pay the rest.
We’ll usually say it’s not fair to apply the average clause if:
- the insurer didn’t ask you for the full replacement or rebuild cost
- there’s no average clause in the policy
Putting things right
If we think your insurer has treated you unfairly or made a mistake, we’ll ask them to put things right. We’d expect them to put you in the position you would have been in if the problem hadn’t happened. How we ask them to do this will depend on the case.
Your insurer might try to pay a reduced amount when you claim or cancel your policy. We’ll usually say they have to pay the claim in full if any of the following are true:
- the insurer didn’t ask for the full cost of replacing all your contents
- the insurer didn’t ask for the full rebuild cost
- the insurer’s questions were unclear
- you weren’t warned about the consequences of underinsurance
We may also ask the insurer to pay you compensation for any distress or inconvenience you’ve experienced as a result of the problem.
Case studies
Couple complain about their contents insurance after expected payment is reduced
Contents insurance Insurance Distress and inconvenience Up to £300
Consumer questions loss adjuster's valuation after fire
Insurance Valuations
Consumer complains about impact of underinsurance
Buildings insurance
Information for financial businesses
You can read more information about underinsurance in the business section of our website. This includes technical details and information to help you resolve complaints.
