Home insurance question.

Rawhead

Hello,

I changed my home insurance recently and sent a copy of the policy to the bank. I reduced the amount of the rebuild cost due to the drastic reduction in building costs. Initial rebuild costs were €500k in 09, new policy has them at €370k in 2011. The bank sent me a letter stating that they want me to insure the rebuild costs as per initial agreement. Do I have to get the house re valued or can I just call them up and sort it out over the phone. The dogs in the street know that building costs have dropped drastically in the last 2 years.
Any help would be appreciated.

ravima

Firstly, sum insured should also include something to cover removal of debris, clearance of site and alternative accommodation, say 10/12.5% on top of the rebuilding cost.

Bank are worried that in the event of a loss (claim), if sum insured was not adequate, then there would be a shortfall and house could not be replaced as it was before the loss.

As long as sum insured covers mortgage amount there should be no problem.

If mortgage exceeds your current sum insured, you should contact bank and let them have details of how you calculated the sum insured. Reference should be made to any indexes that you can locate.

Rawhead

The sum insured covers the mortgage by a considerable margin. I would be fully confident in rebuilding the house with the insured cover. Do I just call the bank and tell them that I won't be increasing the insurance amount?

oldyouth

What ravima said is correct, but persuading banks is almost impossible. Persevere and you should eventually make them understand

Otis Driftwood

The problem is,as your mortgage provider they can insist you increase your sums insured.Ive seen a number of cases where this has happened unfortunately even though re-build costs have dropped by huge amounts.

cedrick

Bankers like to waste money - i think we've all learned that!

You could ignore them and see if they forget about it. You already have their money!

So what if they write you now and then. Unless they get ratty & legal!

oldyouth

cedrick wrote: »

Bankers like to waste money - i think we've all learned that!

You could ignore them and see if they forget about it. You already have their money!

So what if they write you now and then. Unless they get ratty & legal!

It would be a breach of your mortgage conditions. The last thing anyone needs these days is any question marks over their credit rating

cookie1977

I would refer the bank to the scs site www.scs.ie
and ask them why they want you to over insure since surely the insurance company will only pay out for the exact costs of a rebuild and not just any sum you choose to insure the rebuild for. Hence how insurance companies love when you over insure for high premiums.

Merch

Rawhead wrote: »

The sum insured covers the mortgage by a considerable margin. I would be fully confident in rebuilding the house with the insured cover. Do I just call the bank and tell them that I won't be increasing the insurance amount?

You are not covering the mortgage, that is mortgage protection, it seems you are asking about home insurance which is buildings cover + a certain amount of personal contents, the cost to reinstate the building (rebuild it) if it were burned down or levelled or something like that AND if your contents are damaged/destroyed/knicked.

Otis Driftwood wrote: »

The problem is,as your mortgage provider they can insist you increase your sums insured.Ive seen a number of cases where this has happened unfortunately even though re-build costs have dropped by huge amounts.

They can insist you cover it for the cost of rebuilding, not some arbitrary made up number. often Ive been sent renewals with no consideration of reduced costs, rang up and asked why my renewal quote didnt change (in my case my bank was offering the best rates as I alternate between them and ins companies). Went onto scs.ie as other poster has already suggested, measure out the sq feet/metres and put the figures in. My previous company said, oh what do you think its worth? wtf full well knowing the dimensions from the previous year?? they are just trying to squeeze a few quid out of people that dont know any better or simply renew when the letter comes in the door. That must rake in millions in itself.

cookie1977 wrote: »

I would refer the bank to the scs site www.scs.ie
and ask them why they want you to over insure since surely the insurance company will only pay out for the exact costs of a rebuild and not just any sum you choose to insure the rebuild for. Hence how insurance companies love when you over insure for high premiums.

+1

edit also, you should shop around

daddymcdee

you price the re-build cost on the sq footage of the house and then a precentage of the rebuild is valid for contents they will try to get you but just tell them sq fottage is gone from €100 down to maybe 50 or 60 per sq foot

Merch

daddymcdee wrote: »

you price the re-build cost on the sq footage of the house and then a precentage of the rebuild is valid for contents they will try to get you but just tell them sq fottage is gone from €100 down to maybe 50 or 60 per sq foot

You can try tell them whatever you like but they know what it is, your mortgage provider will want it at rebuilding costs and the insurance provider may allow you to fool yourself into thinking you are getting a deal, but if you under insure the property you will not get a percent of what the total rebuild cost will be, you would get nothing, they would do anything not to pay out i think. You can only tell them it has gone from 100 to 50/60 if it has, see the scs.ie otherwise anyone is conning themself.

cedrick

Merch wrote: »

You can try tell them whatever you like but they know what it is, your mortgage provider will want it at rebuilding costs and the insurance provider may allow you to fool yourself into thinking you are getting a deal, but if you under insure the property you will not get a percent of what the total rebuild cost will be, you would get nothing, they would do anything not to pay out i think. You can only tell them it has gone from 100 to 50/60 if it has, see the scs.ie otherwise anyone is conning themself.

The 'average clause' applies in the case of under insurance. So a percentage of the claim is exactly what you get.

Merch

cedrick wrote: »

The 'average clause' applies in the case of under insurance. So a percentage of the claim is exactly what you get.

Have you got something that confirms that, Im interested to know because as far as i have been aware, intentional under insuring doesnt give you any benefit by percent, but null and voids the policy.
If I'm incorrect then there are huge savings by consumers to be made and great losses for insurance companies to suffer< i dont think they would easily let money slip through their hands?

Otis Driftwood

All insurance companies have minimum buildings cover levels in place which are generally from 120 to 150 k so they are covering themselves as much as is possible.

It beggars the question,why would someone intentionally under insure their property to save a relatively small amount of money.

Your policy wont be voided by intentionally underinsuring(which would be virtually impossible to prove) however average clause will be invoked so the consumer is only going to screw themselves.

cookie1977

The simple fact is the bank cant force you to over insure your home so if the home is properly insured for it's correct rebuild value then the bank will just have to accept that. Period.

oldyouth

cookie1977 wrote: »

The simple fact is the bank cant force you to over insure your home so if the home is properly insured for it's correct rebuild value then the bank will just have to accept that. Period.

That is 100% correct in theory. The actual reality is that they will put you through so many hoops to justify your position, that you will probably give up trying. Banks & Building Societies, in my opinion, do not grasp the basic principles of insurance. If a certain figure is on their checklist from HO, that's the figure they want.

cookie1977

Then I'd report them to both the media, the insurance ombudsman and the financial regulator. And they can explain it all to them

Merch

Given quotes I have received, I dont believe the amount of money to be saved by underinsuring is worth it, e.g. you may have a quote of 400 and then to under insure you might have no less than 350, I think the difference would be even less for the matter of tens of thousands, thats off the top of my head when I was getting quotes a few months back. Maybe 1 euro a week??, insurance is supposed to provide peace of mind, if there is a shadow of doubt that exists then you may as well not have it.

cookie1977

Remember this isn't about under insurance. The OP re assessed the build costs and as expected found them cheaper yet his bank tell him he's under insured. If he's dont it properly then that's a ridiculous attitude from the bank.

To be honest I've never informed my bank of my house insurance valuation and it has changed yearly since I bought it in 2008. It's got plenty of cover for a rebuild and refit and thats perfect for me.

Otis Driftwood

Ive always advised customers to over insure by 15 to 20k than risk being underinsured.

Alot of insurers have cut off points where its actually cheaper to have it in at a higher rebuild cost.

The differences between having 50 or 60 k cheaper on your home insurance is no more than 40 or 50 euro but in the event of a claim and you are underinsured then the cost to the customer will be massive.

The rebuild cost can also have implications to what you can insure your contents for which many people dont realise.

The general rule of thumb is that your contents cover cannot be any more then 40% of your rebuild cost.

When calculating your rebuild cost you have to work on a worst case scenario basis ie that your home is completely gutted by a fire.

Things like site clearance,architect + surveyors costs,materials,anything thats fixed to the buildings needs to be factored in.For example,I know many people that have spent upwards of 50k on a fitted kitchen,thats part of you buildings and needs to be accounted for.Like wise if you have hardwood flooring like Junckers for example thats 80 or 90 per square meter to buy that all needs to be kept in mind too.

There are people posting on this thread that seem to not really know what they are talking about.

If someone wants to challenge a bank about this then the onus is on them to prove to the bank what the buildings cover should be so the bank are well within their rights to insist that the property owner get the property surveyed by a registered architect at their (the consumers) own cost.

How much would it be to get a surveyor out for an hour or two to do this?100,200 quid minimum.

On a final note,average clause will be invoked for most claims over a certain value,not just on a total loss basis.

A simple way of describing it is that if you have your home insured for 200k and your bottom floor gets flooded doing 50k worth of damage however your rebuild should have been 300k,you are 30% underinsured.

This means you will get 50k claim minus the 30% average clause = 35k payable.

phormium

Banks base their insurance value required on whatever was stipulated day one by the valuer when you got the mortgage. In past times that was fine as costs mainly increased, now as costs to rebuild have reduced there can be an anomaly and your house could be over insured. Problem is the bank worker cannot change the amount the system is looking for your house to be insured by, usually this can only be changed by submitting a new valuation which obviously you won't want to pay for and neither will the bank but some piece of paper has to back up them changing the recommended insurance cover, the bank worker needs 'cya' so this is generally why they keep insisting on the original amount of cover to be maintained.

Now if you don't do it in general there isnt much they can do, yes you breaking one of the conditions of the loan offer but sure what can they do about it, you have the money and they are not going to call in the loan over it. You will probably get a few letters and then it will go away. Just be sure you are covered for enough.

cookie1977

Otis Driftwood wrote: »

Ive always advised customers to over insure by 15 to 20k than risk being underinsured.

Alot of insurers have cut off points where its actually cheaper to have it in at a higher rebuild cost.

The differences between having 50 or 60 k cheaper on your home insurance is no more than 40 or 50 euro but in the event of a claim and you are underinsured then the cost to the customer will be massive.

The rebuild cost can also have implications to what you can insure your contents for which many people dont realise.

The general rule of thumb is that your contents cover cannot be any more then 40% of your rebuild cost.

When calculating your rebuild cost you have to work on a worst case scenario basis ie that your home is completely gutted by a fire.

Things like site clearance,architect + surveyors costs,materials,anything thats fixed to the buildings needs to be factored in.For example,I know many people that have spent upwards of 50k on a fitted kitchen,thats part of you buildings and needs to be accounted for.Like wise if you have hardwood flooring like Junckers for example thats 80 or 90 per square meter to buy that all needs to be kept in mind too.

There are people posting on this thread that seem to not really know what they are talking about.

If someone wants to challenge a bank about this then the onus is on them to prove to the bank what the buildings cover should be so the bank are well within their rights to insist that the property owner get the property surveyed by a registered architect at their (the consumers) own cost.

How much would it be to get a surveyor out for an hour or two to do this?100,200 quid minimum.

On a final note,average clause will be invoked for most claims over a certain value,not just on a total loss basis.

A simple way of describing it is that if you have your home insured for 200k and your bottom floor gets flooded doing 50k worth of damage however your rebuild should have been 300k,you are 30% underinsured.

This means you will get 50k claim minus the 30% average clause = 35k payable.

Are you telling me that everyone has to contact their bank to alert them to a change in insurance levels? I seriously doubt that's the case. And for a bank (as in this case) to demand that someone insure their house to the original agreement way back when is outlandish as even the cats on the street know that the rebuild costs are way down now.

It's even funnier to see banks so concerned with house insurance when they'd previously give anyone with a heart beat a mortgage. How times have changed.

The fact is if the owner has followed the scs guidelines on rebuild costs and added a little extra then they are fine. It is up to the bank to take it further not the home owner.

I for one have never contacted my bank to tell them of a change in my house hold insurance. I'm fully covered for all my needs. Now life assurance is a different matter.

phormium

You are crediting the bank with too much brains in this case. We are living in different times, insurance only ever went up before with index linking to cost so this issue never arose. The banks have not reprogrammed every mortgage on their system with a reduction of the insurance cover as I dont think it would even be possible anyway as the reduction is not the same everywhere. When you ring up the bank and tell them you are insuring for less that the amount the person working there can see on their screen, do you really think they are going to say thats grand! They have to toe the party line, computer says etc! No bank official can arbitrarily change the amount your insurance cover is set at and if you check your loan offer you will see you agreed to insure the house at the amount specified when you took out the mortgage. Not saying its right just explaining why it is as it is.

cookie1977

I suppose I'm puzzled as to why people contact their banks in the first place

phormium

They don't necessarily, your insurance policy usually has the interest of the bank noted on it, so when you move to another insurer the original company contacts the bank to tell them you have cancelled the policy. This usually prompts the bank to write to you to ask for a copy of your new policy, if this shows a lower amount that the records say then that is probably when they will contact. Not sure what happens if you just renew with same company but for lower amount, bank may not be notified in that case.

cookie1977

Ah. I never went with my banks insurance offer. I've always been with a separate insurer (in fact 3) and my bank has never contacted me re insurance since I bought my home in 2008.

Merch

cookie1977 wrote: »

It's even funnier to see banks so concerned with house insurance when they'd previously give anyone with a heart beat a mortgage. How times have changed.

The fact is if the owner has followed the scs guidelines on rebuild costs and added a little extra then they are fine. It is up to the bank to take it further not the home owner.

I for one have never contacted my bank to tell them of a change in my house hold insurance. I'm fully covered for all my needs. Now life assurance is a different matter.

I cant really understand how, whether they would give someone a mortgage in the past corresponds to house insurance??
I can understand they are very concerned about how much you insure the property for, if you have a mortgage on it, they have loaned you (or me or who ever)the money, they have an interest in that property, you are obligated (anyone with a mortgage)to keep that asset covered in the event of the total loss of the property eg if it burned down completely, otherwise how do they have any collateral in it, it would be gone and no way to recover it, unless the owner could pay off the mortgage, for a pile of rubble? assuming their coverage could not cover the rebuilding costs.

I had always thought that being under-insured meant you could void your policy or that over claiming could also void your policy, probably due to seeing British insurance stuff, as we have so many things in common re regulations etc, Id always gone on the belief that it was very similar/if not the same. I havent come across this average clause before myself, but I would still prefer to have the right cover as some other poster has stated the difference is very small compared to the cost if anything goes wrong.
When I renew, I dislike being asked what I value my house at and what do I want to insure it for, I just tell them, you're the insurance company, you tell me (it kinda feels like they are letting me hang myself by either under covering or over covering the property )while knowing my house floor area/details and having scs.ie opened at the same time. (thought I used a different website also, RSA had one and the same figures came out as the chartered surveyors of ireland).

cookie1977 wrote: »

I suppose I'm puzzled as to why people contact their banks in the first place

Banks do insurance too, but generally when I have changed insurers even when it was back to the banks' ins dept, the mortgage dept would send me a letter asking for the ins details/cover and to have some letter of expression of interest signed.

cookie1977 wrote: »

Ah. I never went with my banks insurance offer. I've always been with a separate insurer (in fact 3) and my bank has never contacted me re insurance since I bought my home in 2008.

Id look into it, I have gotten good deals off my bank ins dept compared to actual ins companies, generally I like to change every year, unless I am still getting the best offer.

cookie1977

I suspect many people over value their rebuild costs anyway. Most people just value their house insurance at the price they paid for it. Hence the insurance companies make a packet from this since the rebuild costs are substantially less then what you paid for it (at least from 2009 back).

I didn't go with my banks insurance offer as their T&C's were unfavorable when I read into them, compared with other insurance companies.

I think if everyone followed the rebuild guidelines (released annually and out usually by March) of the SCS
http://www.scsi.ie/digital_publications/get_lob?id=22&field=publication
and as you said even the RSA have a crude calculator on their site:
http://www.rsagroup.ie/RebuildingCalculator/RebuildCost.htm
people could save a lot of money over what they may have been paying.


Edit
The RSA sites calculator states: The costs are based on building rates as at March 2009.

So maybe stick to the SCS site for updated costs

Otis Driftwood

Cookie,do you or have you ever worked in the insurance industry?

You are making alot of bold statements.

Heres a fact for you.

I used to work for one of the largest insurance companies in the country.Between December 09 and December 10 for every euro they took in on home insurance they paid out approx 1.20 euro on claims and Im sure most/all insurers were exactly the same based on the market share they had.

Read the fine print on the SCS calculator you posted above

The costs in this guide are a guideline to the MINIMUM value for which you should insure the structure of your house.

The costs in this guide are intended to cover typical,speculatively built estate type houses.

There are many thousands of people that dont have typical/speculatively built houses yet you are suggesting that everyone should follow this guide to the letter.

Thats dangerous and naive in extreme and you really dont have a clue what you are talking about so its better for people that are genuinely seeking advice to ignore pretty much anything you have stated.

cookie1977

Where did I say the letter? In fact if you've read my posts at all I've said add extra.

cookie1977

Plus as you and I have both said. They're guidelines.