If we take this cover out we will pay in sterling, as our property is in the euro zone currency will we be paid in sterling or euros in the event of a claim?

If you take this policy out paying in sterling then monies you receive in the event of a claim will be paid to you in sterling. If for instance you have £10,000 contents cover and claim to have all of the contents replaced then you will be paid in sterling regardless of the country your property is in.