Helping You To Avoid Underinsurance
Insuring Your Home
Should the worst happen and you need to make a claim on your home insurance, it is important to have your home and belongings insured for the right amount.
What Is Underinsurance?
Underinsurance describes the situation when you insure your home for less than the amount it will cost to rebuild from scratch and replace your contents.
With construction costs rising, it is important that all homeowners review their home insurance policies every year to ensure that they have enough cover in place. Recent research published by the Central Bank of Ireland highlighted that 16.5% of Irish homes are underinsured.
Homeowners may have their homes underinsured where they haven’t reviewed the rebuild cost in a while or where the policy hasn’t been updated to take into account any recent renovations or extensions.
If your home is underinsured and you need to make a claim, you may not receive the full amount required to cover the rebuild, repair or replacement costs.
Should I Insure My Home Based On How Much It Would Sell For?
The simple answer here is no.
The market value of your property which is the amount that your home would sell for is very different to the rebuild cost. The rebuild cost is the total amount to rebuild your home if it was completely destroyed. The rebuild cost should include the cost of demolition, clearing debris and professional fees such as surveyors and architects. The rebuild cost could be higher or lower than the market value of your home.
Example of Underinsurance
Let’s say a home is insured for €300,000 but the rebuild cost is €400,000. This means the property is underinsured by €100,000, or 25% of the rebuild cost.
If you put in a claim for €50,000 for damage from a burst pipe, the amount that would be paid out would be cut by 25%. So in this example, the €50,000 claim would be reduced by €12,500 (25%) and the homeowner would only receive €37,500.
The homeowner would have to fund the difference of €12,500 from their own pockets to complete the repairs.
In the worst case scenario where a home was completely destroyed, €300,000 would be the maximum amount that would be paid – leaving the homeowner short of €100,000 to rebuild the home.
How Can I Tell How Much My Home Is Insured For?
If you have a policy with Chill, simply check your Policy Schedule which was sent to you after you took out your policy. The rebuild cost is referred to as the ‘sum insured’ in your Policy Schedule.
How Can I Avoid Underinsurance?
To get an accurate estimate of your rebuild costs, you can use the Society of Chartered Surveyors’ House Rebuild Calculator.
The calculator will ask you to enter details of your home such as the house type, region and floor area. If you are short on a measuring tape, there are plenty of smartphone apps which can help you measure the width of rooms. It is important to include high value kitchen fittings and other finishings.
If you need that extra peace of mind, you may want to contact an independent Chartered Quantity Surveyor who can help to calculate the exact cost of your home. This might be suitable in situations where you have a non-standard home.
Any Tips To Value My Contents Correctly?
Making a list of your contents to get them covered can be a timely and daunting exercise. Read our blog for our best advice on calculating the right value of your contents.
How Do I Update My Policy If I Am Underinsured?
If your property is underinsured, it is important that you contact us and let us know so that your policy can be updated. Our team are available to take your call on 01 7671971 and your policy can be updated at any time not just at renewal.