Your insurance policy is based on utmost good faith and Insurers expect the levels of insurance to adequately reflect their current replacement value.
This means that as replacement values change, markedly for example regarding jewellery, Insurers require valuations to be up to date.
In the event of a claim, Insurers will check whether you are underinsured. If they determine that you have not insured for the full value of your belongings then the amount of the settlement can be reduced proportionately. For example if the cost of replacing your contents is £90,000, and you insure for only £60,000, if you are burgled and lose £10,000, assuming you can prove that £10,000 is actually the replacement cost of the items stolen, Insurers may penalise you for underinsurance by deeming you to have insured with them for only 2/3 of the value of the stolen goods and would pay out only £6,666.
Where the underinsurance is excessive or can be shown to be intentional insurers may cancel your insurance policy entirely. Therefore you are strongly advised against underinsuring.
However we would also advise you against over-insuring. For example, when valuing jewellery or other items with a large retail markup, you should value it at the cost of replacing it via a manufacturing or wholesale jeweller in Hatton Garden, rather than on a retail basis. This is because insurers have relationships with jewellers which allow them to replace stolen or damaged jewellery at a much lower cost than you would pay at a high-street jeweller.
For example. If a ring on the high street costs £15,000 and the same ring is available from a manufacturing jeweller for £9,000, insurers would only pay about £9,000 to replace it, even if you had bought it from a retailer and had paid £15,000. Therefore there is no point paying for insuring the extra £6000 for this item as you will never see the benefit of it.
