Homeowners typically undervalue their home contents by 40%, and that can have serious consequences down the line. Accurately determining the value of your house contents is essential in order to take out a home contents insurance policy, as well as for the purposes of house contents valuation for probate, in the event of the owner’s death.
Approximations by the Association of British Insurers suggest the average 3-bedroom family home contains items worth a total £55,000; that includes furniture, appliances, clothing and electronic gadgets. To get an accurate picture of the exact value of your home contents, industry professionals recommend you go through each room and make an inventory—making sure to include all fixtures and fittings—and place a figure by each item to achieve a total.
What items are included in house contents insurance valuations?
In short, house contents simply include anything that isn’t nailed down; however there are some items which may be easy to overlook. From your curtains and carpets to garden furniture, everything needs to be given a price. An independent valuation also ensures that items which may be harder to evaluate are given an objective price, particularly any personal items of sentimental value.
To help give you an idea, here’s our estimated value of contents you might find in your home:
A standard single garage/studio flat – £12,000
A 1 bedroom flat – £16,000
A 2 bedroom flat – £24,000
A 2 bedroom house – £34,000
A 3 bedroom house – £55,000
A 4 or 5 bedroom house – £75,000
Don’t forget that most insurance policies offer ‘new-for-old’ cover, so rather than guess how much an older item cost when you bought it, look up what the same or equivalent item would cost to buy new. The most expensive individual items to replace are carpets and curtains, which have a combined estimated average cost of £9,000 throughout a family home. This is followed by clothes and shoes, which amount to around £1,500 per person to replace. TVs and electronics cost a further £5,500, a figure that continues to increase as householders invest in more tablets, smartphones or games consoles.
Determining the value of your home contents is also important in terms of probate valuations, which determine whether or not inheritance tax is payable on an estate. The threshold on inheritance tax is £325,000, which covers both the home and its contents, and the tax itself is 40% of that value (or higher). In such cases, it is best to contact a reliable law firm like Rocky Mountain Wills and Trusts to help you out with the situation.
What happens if I miscalculate the value of my house contents?
Some insurance websites offer quick online house contents valuations, but these are often littered with caveats about the risks involved by inaccurately valuing your possessions. Here’s why a professional, independent valuation is the best way to go.
You might overpay on insurance premiums
Insurance premiums for home and contents insurance policies are calculated relative to the cost of replacing your home contents and other belongings in the event of damage or loss. Most homeowners will expect to pay around £124 on contents insurance every year, depending on factors such as where you live, and the security systems installed in your property. If you overestimate the value of your contents, you could be paying above the odds and not be eligible for any return.
You might be underinsured
Just as overestimating can result in higher insurance premiums, underestimating the value of your belongings can leave you underinsured if you need to make a claim. If you have insured the contents of your home for, say, £35,000 but the real value is £70,000, your insurer may reduce any payout on a claim by up to 50% to reflect the amount of underinsurance. It is also important to update your insurance level whenever a significant purchase is made for the home, whether it’s white goods, a new bed or an iPad.
You might pay excessive inheritance tax
Probate valuations are necessary for the fair execution of your will, and according to your wishes. Estate administrators can be held personally financially liable for any loss resulting from a breach of their duty, even if mistakes made were genuine errors. Probate valuations are also used to determine if inheritors are required to pay inheritance tax and, if overestimated, can require an inheritor to pay unnecessarily.
