‘Gold mine’ homes face under-insurance risk

UK consumers are at potential risk of leaving their jewellery and other treasures underinsured to the value of some £4.9 billion because the cost of gold has risen by a quarter in the past twelve months, warns a leading specialist insurance provider.

The RIAS ‘Golden Age' study reveals that there are over 112 million items of gold in homes across Britain, with an average total value of £1,189 per household - meaning that the total value of gold jewellery and other items owned by UK consumers stands at £19.7 billion.

However, almost two thirds (61%) of these gold owners have never had any of their gold items valued. This means that millions of consumers could be left under-insured to the tune of £297 per household, and therefore out of pocket. This equates to an under-insurance risk of £4.9 billion across Great Britain.

As millions of consumers' home contents insurance policies could be out of date, policyholders may be in danger of receiving substantially less than they should for their ‘high-risk' items if they suffer theft, loss or damage. For many, this means that should the worst happen, they will not be able to replace their valuables.

‘Golden oldies'
The online study highlights over 50s as particularly at risk from this "under-insurance trap".

Over 50s tend to own more gold items than the average UK household (with eight items of gold per household, compared with six items in under 50s households). Furthermore, the value of over 50s' gold tends to be higher, averaging £1,313 in total per household, compared with their under 50s counterparts, whose gold averages at £1,085.

However, the RIAS research found that more than half (55%) of over 50s who own gold have failed to have any gold items valued since they were originally purchased, and that the vast majority (93%) have not had their items revalued in the last two years, as is generally recommended.

The ‘Golden Age' study also found that seven out of ten (71%) over 50s do not have any of their gold items specified as ‘high-risk' on their insurance policy, meaning they could be subject to single item limits which could be lower than their true value.

Despite the price of gold rising by a quarter (25%) to £709 per ounce in January 2010, just 11% of consumers are aware that the market value of gold has increased by up to one quarter, which may explain why some have not informed their insurance provider.

Janet Connor, Managing Director at RIAS, comments: "Many people over 50 have accumulated a significant number of gold possessions, which may hold both emotional and financial value. With the value of gold significantly increasing over the past 12 months, all consumers would be wise to ensure that all their ‘high-risk' items are regularly revalued, to avoid any nasty surprises if they did have to make a claim on their household contents insurance.

"The most an insurer will pay for any high-risk item is the sum the customer has insured it for, as reflected in their policy schedule. By reviewing the value of individual items every two years, and updating policies as necessary, consumers can eliminate the risk of being under or over-insured."

No cashing in for consumers
Despite the current economic climate, eight out of ten (81%) over 50s gold owners are not planning on parting with their gold in the near future. Less than one in ten (9%) over 50s are planning on using their entrepreneurial spirit to cash in their gold items over the next few months.

Matt Graydon from The World Gold Council observed: "Last year the gold price rose 25% in value, while almost all other assets headed in the other direction. Gold's wealth preservation characteristics have become centre stage during this period of economic turmoil but remain important to investors during any period of time.

"Due to its enduring value gold remains a sound investment for future family heirlooms. If you already own some gold items you may be surprised at how much they are worth and so it's worth looking into a valuation sooner rather than later."

For more information about home insurance from RIAS, as well as the full range of products, visit rias.co.uk.