The perils of underinsurance: Why cover matters more than cost

In a world where cost-cutting often reigns supreme, it's easy to view insurance as just another bill to minimise. But when disaster strikes, such as a house fire or flood, the true value of your insurance policy is revealed. And if you've opted for the cheapest premium over comprehensive coverage, you may find yourself dangerously underinsured.

What is underinsurance?

Underinsurance occurs when the coverage on your insurance policy is insufficient to cover the actual cost of a loss. This doesn’t mean you’re uninsured—it means you think you're protected, but when it matters most, your policy falls short.

For example, if your home is insured for £750,000 but the cost to rebuild it is £900,000, you’re underinsured by £150,000. In the event of a claim, insurers may apply what is known as an Average Clause - in effect reducing your claim by the proportion of underinsurance.

There are several reasons people end up underinsured

• Focusing on premiums instead of protection

  The allure of a lower monthly or annual premium can obscure the bigger picture. Many consumers shop for policies as they would for phone plans - comparing prices without fully understanding the coverage details.

• Outdated valuations

  Property values rise, and costs of construction inflate. If you haven’t reviewed your policy in several years, chances are it’s outdated.

• Complex or hidden exclusions

  Some policies have clauses or limitations buried in the fine print. Without expert advice, policyholders may mistakenly believe they’re fully covered.

• DIY coverage choices

  Online tools make it easy to get insured in minutes - but they can’t replace the nuance and personalised advice of a professional broker who understands risks you may not even know exist.

Prioritise coverage

When buying insurance, the question shouldn’t be “What’s the cheapest option?” but “What happens if the worst happens?” It makes sense to prioritise your coverage.

• Peace of mind

  Comprehensive coverage means you can weather a storm - literally and figuratively - without the added stress of financial ruin.

• Long-term savings

  The right policy might cost more upfront, but can save you tens or hundreds of thousands in the event of a claim.

• Risk Management, not just risk transfer

  A well-structured policy doesn’t just pay for losses—it helps prevent them, often offering services like risk assessments, early-warning systems, or legal support.

How to avoid underinsurance

• Talk to us for professional advices

  We can assess your risks and match you with the right coverage.

• Review Annually

  Life changes. So should your insurance. Reevaluate your needs every year - or after major life events.

• Know the details

  Understand not just what your policy covers, but what it excludes. Ask questions. Read the fine print.

• Insure to Full Value

  Especially for property and assets, make sure your insured value reflects the real cost of rebuilding or replacing—not what you paid ten years ago.

In summary

In the world of insurance, you often get what you pay for. Chasing the lowest premium might feel savvy in the short term, but it can leave you dangerously exposed when you need help the most. The smarter strategy? Invest in comprehensive coverage that truly protects what matters; because when disaster strikes, cover beats cost every time.