Couple complain about their contents insurance after expected payment is reduced

Contents insurance Insurance Distress and inconvenience Up to £300

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

What we said

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: 

  • Gold, with up to £75,000 cover
  • Silver, with up to £50,000 cover
  • Bronze, with up to £25,000 cover

They weren't sure how much their possessions were worth, but they thought £50,000 would be enough to cover their more expensive and important items. Having read the policy brochure, they decided to go with Silver cover. They completed the forms, sent them off and received confirmation documents back. They read these and filed them away. 

The following winter, Daniel 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 loss adjuster came to assess the damage and investigate the claim. 

The adjuster found that Daniel and Chiara's contents were worth around £100,000 in total – which meant they were only insured for 50% of the value. The insurer accepted the claim, but only offered to pay £25,000 because this was 50% of the sum insured and an underinsurance clause said they could do this. 

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. 

We looked at what the application forms said about choosing how much to insure their home for. Neither the form nor the key features document mentioned insuring the full cost of their possessions. There were simply three levels of cover to choose from, which reasonably gave Daniel and Chiara the impression they could choose how much cover they wanted – regardless of the total value of their contents. 

We felt that this was significant. If they weren't asked to estimate the value of all their things, we didn't think it would be fair to penalise them for not doing so. They had understood they would receive up to £50,000 in the event of a claim, even if that didn’t cover everything they owned, and they were happy to buy the policy on that basis. The sales journey hadn’t specified that Daniel and Chiara had to choose cover based on the full replacement cost of their contents – or that their claim may be reduced for not doing so. We weren’t satisfied this treated Daniel and Chiara fairly.

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.