Home contents insurance covers all your belongings and will replace them if they are damaged or stolen.
Or will it?
Most insurers impose a ‘single item limit’ on contents policies, which means you might not be able to claim for the full value of expensive items, such as jewellery or a home entertainment system.
Here’s how it works – and what you need to do if you own valuables worth more than the limit.
Your contents policy insures your possessions up to a certain amount, known as the sum assured. So, if you take out a policy with a sum assured of £50,000, you could put in a claim up to a total of £50,000.
But - and it’s a big but - the policy will almost certainly also include a single item limit, typically between £1,500 and £2,500.
Let’s say the single item limit on your policy is £1,500. You would not then be able to claim for any one item beyond that £1,500 limit, even if the total claim were less than £50,000.
If you own any valuables, you could therefore end up out of pocket.
Here’s an example of how it works in practice. Say your home contents were damaged in a flood. You could put in a claim for various belongings that added up in value to £25,000, expecting the policy to pay out in full.
But if one of those items were a watch worth £2,000, the insurer would pay out only up the single item limit of £1,500 – unless you listed the item separately on your policy when you took out your insurance. More on that below.
Some insurers also set a maximum claim limit for all valuables, which could be as low as £5,000.
With this sort of arrangement, if a thief stole all your jewellery, the maximum pay-out for the collection of items would be £5,000, regardless of their true total value.
And there would still be a single item limit of, let’s say, £1,500.
Other insurers insist that valuable items make up only a certain percentage of the total sum assured, typically about 30%.
So in this scenario, with a contents sum insured of £50,000, the limit of cover for valuable items would be £15,000. And within that £15,000, there would be a single item limit in operation.
What are ‘valuables’?
Many people are caught out by the single item limit because they assume they don’t own anything valuable. But it can be a dangerous assumption.
As well as obvious things such as jewellery, many people have computers and other tech gadgets, jewellery, designer goods, musical instruments, collections, antiques and bicycles - and all can fall foul of the single item limit.
Most insurers automatically insure all belongings up to the limit, but it’s worth checking whether you have to give details of any expensive items in your home.
And if you do own any valuables that are worth more the limit, you must tell the insurer so that they can be added to the policy as a ‘specified item”. This will mean they are insured up to their full value, beyond the single item limit.
Valuables typically include gold, silver, works of art, fur, stamp collections, medals, jewellery and watches. But the definitions vary, so always ask your insurer.
You might also have to provide proof of ownership and evidence of the item’s value.
The cost of home contents cover is likely to go up if you want to insure any valuables that exceed the limit. But if you don’t let the insurer know about items that breach the single item limit, they will not be covered and the company could refuse to pay out in the event of a claim.
In some cases it might even be worth taking out a separate insurance policy for your valuables, or even keeping them in a bank vault.
The important message is to be aware of how contents insurance in general treats valuables, and what your particular policy says about getting full and adequate protection for your prized possessions.