From: "Alec" 
Newsgroups: uk.finance
Subject: Re: Insurance Under Insured?
Date: Thu, 3 Feb 2005 08:30:11 -0000


"Jane Tweedynn"  wrote in message 
news:36d072F50m9sqU1@individual.net...
> Having read previous posts, none that I can find by googling, probably as 
> I am using incorrect terminology, I am sure I read that if you insure say 
> your home contents for less than the actual value, the insurance company 
> can make some sort of deduction on any claim.  Can someone explain what I 
> am trying to ask?
>
Yes, it's called average clause.
>
> Suppose I have purchased goods for £30k and I consider them only to be 
> worth today £20k.  Can I insure my contents for only £20k or do I have to 
> insure it for £30k?
>
If you have 'new-for-old' policy (most are), you have to insure items for 
their 'replacement' cost.
>
 Is this deduction made only if I claim on the £20k or can a
> deduction be made on any claim?
>
Yes, any claim when replacing a damaged or lost item, though insurers will 
only investigate underinsurance if you are making a largish claim.
>
> Am I making any sense?
Yes. Though if you have an 'indemnity' policy, you only need to, and only 
get back, value of an item after taking away wear and tear. The idea is you 
should be able to replace it with an equivalent, secondhand good.

Alec