1. Reasons for Underinsurance
The main cause of private houseolders underinsuring their properties today is down to their own personal efforts to budget their finances. Every year as motor and life premiums increase, homeowners feel that they can save a ‘few bob’ by bringing down their level of property insurance. In general they feel that the chances of needing the full value of their policy are so low that its worth reducing it a bit. Unfortunately that is not the case, insureres reserve the right to reduce the amount they pay you in the event of any claim of any size if you dont purchase the correct level of insurance in the first place. This is listed in the terms and conditions of your policy and can sometimes called ‘Average’
The second reason for underinsruance, and this comes fairly close to the first one is homeowners not understanding how the ‘Buildings Sum Insured‘ should be calculated. Your sum insured does not represent the ‘market value’ nor does it represent ‘what it cost you to build’ or even ‘what you believe you can build it for‘. The Building Sum Insured should the equal current ‘Rebuilding’ cost for your area of the country and for your current house type, as set by the ‘Society of Chartered Surveyors of Ireland’ www.scsi.ie
Your Building Sum Insured should represent the total amount of money needed to place you in the same position after the damage as before.
2. But what exactly should my Building Sum Insured cover?
- In the event of a severe fire or oil damage claim, you first may need to completely demolish the property, remove all derbis off site and dispose of in a landfill which carries the correct licencing to receive contaminated rubble, this in itself could be 50/60k or even more. If your property is semi detached or mid terraced you have to do all of this without causing any damage to your neighbours property.
- Planning premission and lcoal authoruty fees. Once a house has been demolished, you (by law) have to apply for planning permission to rebuild the property, even if it is exactly the same as before.
- Once you have received planning permission, you will then have to start biulding again now from scratch. Your sum insured should contain enough money left in it to bring the property back to the same standard as before, incuding any sheds outbuildings, driveways, garden walls, kitchen or bathroom fittings and as far as decoration to all rooms and areas inside and out.
2a. Advice from the Consumer Agency of Ireland on Buildings Sum Insured
“You are not legally obliged to take out home insurance but if you have a mortgage, your lender can insist that you have buildings insurance so that you can afford to rebuild your home if it is destroyed. Home insurance is usually sold as a single policy that includes:
Buildings Insurance which covers you for damage to buildings
Contents Insurance which covers you for loss of or damage to the contents of your home
All Risks Cover which covers you for loss or damage to valuables (even when outside your home)
Liability Insurnace which covers you for injury to other people in or around your home.
It is very important that you insure your home and contents for the correct amount, in case you later have to make an insurance claim”
“You should insure your home for the amount it would cost to rebuild it, which is called the reinstatement value. This is different to the market value of your home, which is what you would get if you sold it. You can get details of current rebuilding costs from the Society of Chartered Surveyors”
“In some cases, your claim may be reduced. For example, if you have underestimated the cost of rebuilding your home and replacing your belongings when taking out home insurance, you could get less money than you claimed for. This is due to an ‘average clause’ ‘which is included in most policies.
For example, if the contents of your home are worth €40,000 but you insure them for just €20,000 and they get completely destroyed by fire, the most you will get from your insurance company is €20,000.
Even if you claim €10,000, the insurance company will look at the overall amount you insured your contents for and will consider that you are only half insured. So they may pay out only €5,000 or half of the total damage”
For more on the above referenced section 2a. please visit http://www.consumerhelp.ie/home-insurance
Stephen O’Connor and Co carry out an independant survey of your property during an insurance claim process and for no extra charge will give you an estimaye on the correct level of insurance you should purchase at your next renewal. It should also be noted that you can raise your level of cover over the phone, even if your renewal is not due, although you may have to pay a small increased premium.
We are available as always on 0876487466 or 0429376872 (Office Hours) or send an email to firstname.lastname@example.org any time. We provide a nationwide service on the entire Island of Ireland.
Please, Please, Please check your sum insured, it has to reflect ‘Rebuilding’ costs and not ‘Market Value’