Please enjoy our latest article on Overinsurance, by Kerry Hall

When conversations turn to contents insurance, the focus is often (quite rightly) on underinsurance. However, the opposite issue of overinsurance is often more common than many realise and carries its own set of implications for brokers, insurers, and clients alike.

In simple terms, overinsurance occurs when the declared sum insured exceeds the true retail replacement cost of a client’s contents. While this may seem like a harmless or even cautious approach, it can lead to unnecessarily high premiums without delivering any additional benefit if there was ever a claim. Unlike some other classes of insurance, contents policies are not designed to pay out more simply because a higher figure has been declared. In the event of a loss, settlement is based on the cost to replace items as new at today’s prices.

How does overinsurance happen?

One common reason is estimation. Clients are often asked to provide a single figure for the total value of their contents, frequently without a clear structured approach. Unsure of how to tackle this, many clients understandably err on the side of caution and “round up.” Over time, this cautious approach can compound, particularly if the figure is never properly reviewed.

Index-linking is another contributing factor. Most insurers use it to automatically adjust client’s contents cover over time so it keeps up with inflation which is considered good practise and helps avoid underinsurance. But there’s a catch. If the original value was already set too high, index-linking can quietly push it even further off track. Over time, the insured amount keeps creeping up, even though the actual value of what clients own might not have changed much, or in some cases, might even have gone down.

Market trends also play a role. As tastes evolve and furnishing styles shift, the value of many items can decline. Categories such as antiques, furniture, certain art genres, and porcelain have all seen notable drops compared to their peak values 20–25 years ago. While rarity and quality still dictate desirability, and there are always exceptions, the general trend across many categories is one of softening values driven by changing preferences.

Lifestyle changes can have an impact too. People might downsize, pass items on to family, or just simplify what they own over time. But if their insurance isn’t updated to reflect that, those old figures can stick around long after they’ve stopped being accurate.

For brokers and insurers, overinsurance presents a subtle challenge. While it may not carry the same immediate risk exposure as underinsurance, it can impact client outcomes in other ways. Clients paying higher premiums than necessary may question value at renewal, particularly if they become aware that their cover exceeds their needs. In a market where transparency and trust are increasingly important, ensuring accuracy is key.

How can clients mitigate the risk?

As premiums rise, many clients are seeking valuations, concerned that their level of cover no longer reflects the true value of their belongings.

This is where getting a professional contents valuation really makes a difference. Instead of relying on estimates, clients get a clear, accurate figure based on what it would actually cost to replace everything today. It looks at the full picture, including everything from everyday belongings right through to high-value pieces such as artwork. Also, ensuring that contents are correctly split into their relevant categories (general contents versus fine art, antiques and collectables) can effect premiums and actually bring them down.  

Just as importantly, it gives everyone peace of mind. Clients know they’re not underinsured or paying more than they need to, brokers can demonstrate due diligence, and insurers get a much clearer view of the risk.

Overinsurance is rarely intentional. It tends to build up over time through caution, small adjustments, or simply not revisiting the numbers. But left unchecked, it can easily lead to a discrepancy in premium and cover.

Making sure your cover is accurate, especially in a world where both clients and insurers want certainty, leads to a much better outcome all round.