Insurance: Tips to avoid being under insured

1. It's really important to understand what you are covered for under your policy. What does your sum insured include? For example, most house policies are based on square meter measurements, and things like decks, outbuildings, and non attached garages are additional items which must be declared. Always check with your broker or insurance company to be sure exactly what is covered.
2. Car valuations for Agreed Value policies are determined by a dealers guide book. It works on average sale prices for cars. This assumes that your car is 'average'. If you have done less than the average mileage, or have maintained it to a higher standard, or you have added a number of expensive accessories then your value may be understated. An easy check here is to look on Trademe and see if you can find a car that is similar to yours and check what value it is or has been sold for.
3. Contents insurance has many factors that can potentially give rise to under-insurance. For example you are probably constantly replacing items at home and consequently your insurance values should also be adjusted. All insurance companies provide a valuation guide to assist you and once in a while (3-5 years) you should do a full recalculation to see how appropriate your level of cover is.
4. Staying with Contents insurance, you need to review the adequacy of the sub limits in the policy. This is especially related to items like paintings, motor vehicle accessories, jewelery, etc. If you do not increase these by specifying items over the standard policy limits then your could find yourself well under-insured.
5. Be very careful regarding the ownership of items, particularly if say your company or family trust own an item. Check with your broker or insurer on the ramifications of cover for items that are not directly owned by the insured person.
6. If you have any unusual items or collections then check with your insurer or broker to understand what requirements there are for insuring them correctly. For example, most policies limit stamp or coin collections and the limits will be way lower than most collections will be worth.

Moral of this story It is very easy to set-and-forget insurance. When you do this you are putting yourself at risk of being in the third of people in the under-insured category. Take some time, and the better the policy is structured (correct cover and sums insured), then the easier the maintenance of it is in the future. If you really want to pay less premium then consider a higher excess rather than under-insuring. A higher than standard excess will lower your premium. It's also a really useful process to take photo's of your contents and to keep a list of serial numbers, and perhaps even do the valuation on a spreadsheet on your computer. If you do this then give your insurer or broker a copy of the spreadsheet. It could prove very valuable as a means of supporting a claim.