Couple complain about their contents insurance after expected payment is reduced

Insurance Contents insurance

After a neighbour’s burst pipe caused £50,000 of damage to their home, Daniel and Chiara complained to us about unsuitable contents cover.

What happened

Daniel and Chiara were looking for a better deal on their contents insurance. After shopping around, they settled on a company and printed off an application form with its supporting documents. 

When filling out the forms, there were three options that Daniel and Chiara could choose from: 

  • up to £50,000 cover with accidental damage cover
  • up to £50,000 cover without accidental damage cover
  • up to £25,000 cover with a deduction for wear and tear

They weren't sure how much their possessions were worth, but they did have some quite valuable items. Having read the policy brochure, they decided to go with the highest level of cover. They completed the forms, sent them off and received confirmation documents back. They read these and filed them away. 

The following winter, their neighbour Yves arrived home from work one day to find that his house had been flooded by a burst pipe. He immediately phoned his insurer and a plumber. After the water had been pumped away, a loss adjuster came to assess the damage and investigate the claim. 

The adjuster found that there was well over £50,000 worth of damage to the contents of Daniel and Chiara's home and reported this to their insurer. The insurer accepted the claim, but only offered to pay £25,000. This was because they said that Daniel and Chiara had underinsured the house. 

Daniel and Chiara were very unhappy about this. They thought that they had up to £50,000 insurance, and even if the contents of their house were worth more, they felt they should get the full £50,000. So they complained to their insurer. 

Their insurer explained that because the couple hadn't given the full value of their contents, they were entitled to make a reduced payment. Daniel and Chiara were still unhappy and frustrated about this, so they came to us and asked us to take a look. 

What we said

We wanted to see all the information that Daniel and Chiara had been given when buying their insurance. The couple and the insurer sent us copies of the documents. 

The policy advertised said it was straightforward, in plain English and without any catches. The brochure said: 'Sometimes people worry about not having enough cover. The result of being underinsured is that, in the event of a claim, they won't be covered for the full amount of their loss. Our insurance removes this worry for most people by automatically insuring you up to a maximum amount.'

By selecting the highest level of cover, Daniel and Chiara were right to think that they wouldn't be affected by underinsurance. 

We looked at what the application forms said about choosing how much to insure their home for. Neither the form or key features document mentioned insuring the full cost of their possessions. There were simply three levels of cover to choose from. 

We felt that this was significant. If they weren't asked to estimate the value of all their things, we didn't think they should know that the top level of cover might be unsuitable for them. 

We looked at the forms and paperwork that Daniel and Chiara had seen. We believed that it would be reasonable for them to have thought that they weren't in danger of underinsurance. We decided that it would be unfair to hold this accidental underinsurance against them. 

We told the insurer to reconsider the claim, disregarding the clause about underinsurance. They also had to compensate the couple £300 because their slow handling of the claim had caused stress.