Letter warning about being underinsured on the way to everyone with a home policy

coylemj

Charlie Weston is the 'Irish Independent personal finance editor', he frequently tweets on home and motor insurance issues. He has just tweeted this ...

A letter is on the way to everyone who has home insurance, and this one is worth acting on. Insurers have been told to warn consumers that there is a major problem with under insurance, leaving homeowners exposed if they make a claim.

https://twitter.com/CWeston_Indo/status/1646171049556426753

Allinall

Very difficult nowadays to estimate rebuilding costs.

On the plus side, it's relatively small money to make sure you are well covered.

godtabh

I got an email/text about it from Chill a couple of weeks ago. Was under insured by c. €130k. Added another €100 to insurance

10-10-20

Probably worth linking this calculator:

https://scsi.ie/consumer/build/calculator/

coylemj

https://www.boards.ie/discussion/comment/120469868#Comment_120469868

I beefed up my cover at the last renewal but when I calculated the cost per thousand (of additional cover) in the premium, it was nothing like what you were hit with. Did you increase your cover in the middle of the policy year and, if so, did that €100 include an 'admin' charge for the privilege of increasing your cover?

ednwireland

yep had to change mine recently, rebuild costs risen significantly.

elperello

https://www.boards.ie/discussion/2058292092/letter-warning-about-being-underinsured-on-the-way-to-everyone-with-a-home-policy

Good man Charlie.

I got a letter from my insurer and followed the advice.

walterking

This is old news and as usual the indo is months behind.

Many articles and radio commentary months ago about this and certainly Liberty have had a warning since last August with a very good explanation of what happens

the_amazing_raisin

https://www.boards.ie/discussion/comment/120469887#Comment_120469887

I've often wondered what is counted as rebuilding costs and what isn't

From what I can tell the basic calculation factors in the costs of rebuilding the house up to the fit out stage, and you can add extras for the kitchens, bathrooms and other fixtures

But realistically are people going to be adding a lot on for those? I guess if you had a designer kitchen you might want to, but frankly if my house got burned down I'd be happy for everyone to escape unharmed and to have a roof over my head again, eventually. If that means I've got an IKEA kitchen with beko appliances then so be it

I don't see how that could happen without costing you something unless you made the rebuilding costs very high. And then is it worth it paying the extra premium for it over the long run?

The other thing I find confusing is the difference between contents and rebuilding costs. I presume things like sofas and beds are under contents and not rebuilding. Again I don't really see any reason to go with higher than the minimum amount unless you've got some very expensive furniture that you'd want to replace

What are other people's views on this?

EDIT: Okay so to answer my own question to some extent the building cover is defined as the building, it's fixtures, fittings, services and interior decorations (and a whole bunch of other stuff but not hot tubs or spas, for some reason)

Contents is defined as your belongings within the house, with some exclusions (including drones and UAVs, which seem a tad arbitrary 🤷‍♂️)

So the basic rule seems to be that if you can move it about it's contents, if it's stuck in place then it's the building

godtabh

https://www.boards.ie/discussion/comment/120469896#Comment_120469896

it was the start of the policy

c.p.w.g.w

Got one myself, but we have only just moved in

zg3409

Firstly your site is free and value is not the for sale price of neighbours houses.

Worst case your house needs to be demolished, the waste removed and the house needs to be rebuilt to current regulations such as A rated insulation hest pump etc.

So the actual number is very very hard for the average Joe to calculate without a tool like linked to below.

Ideally you get the number right, better to be slightly over insured, but it's very bad if you are under insured.

Say you insure for 300k, house burns down and costs 400k to fix. You will not get 300k to do this. You will get 3/4 of 300k or 225k to rebuild when you need 400k to do the work. This can be a serious issue and result in having no home. Also renting costs for 12-24 months need to be factored in.

Furze99

One thing I've learnt about insurance companies over the years.. They love taking in your premiums and even better if they can be increased. But they hate paying out!

GSBellew

https://www.boards.ie/discussion/comment/120470758#Comment_120470758

One thing to keep in mind is that it does not only come into play in a total loss scenario, under insurance is factored in for any claim, the average clause.

Say you should be insured for 300k but are insured for 200k, your €15k kitchen gets destroyed in a fire, you get €10k max as you were underinsured.

gipi

I got a letter from my insurer (Zurich) about this at the start of the year.

irelandrover

https://www.boards.ie/discussion/comment/120472035#Comment_120472035

Why do you only get 225k to rebuild. I always thought if it cost more that 300k then the most you would get is 300k. But if it cost less youd get the amount it cost.

johnnyskeleton

https://www.boards.ie/discussion/comment/120472662#Comment_120472662

If your house costs 400k to rebuild but you only insure for 300k, you are insuring 75% of the rebuild cost. If you then have partial damage, youre only insured for 75%, so only get 75% of the replacement cost.

Wheety

https://www.boards.ie/discussion/comment/120472662#Comment_120472662

You're paid out pro rata on how under insured you are. The same goes with smaller claims. Using the above example, if you have a leak and it costs €10,000 to remedy the insurance company will only pay out €7,500 as you were under insured by 25%.

mondeoman72

https://www.boards.ie/discussion/comment/120472573#Comment_120472573

So did I. I used the website and got a figure of 260. I insured for 300.

If disaster does happen, I don't want any argueing. There would be enough stress

zg3409

https://www.boards.ie/discussion/comment/120472662#Comment_120472662

That's not how it works unfortunately. Also if you declare a house alarm for reduced insurance then you have no contents theft cover if the alarm is not armed and possibly only if it's serviced regularly and all doors are locked etc. They love any excuse to pay nothing or less.

irelandrover

https://www.boards.ie/discussion/comment/120472733#Comment_120472733

The partial damage I fully understand.

If I insure for 300 and my house is worth 400 then I get 75% of any damage. If it costs 270 to rebuild then I was in fact over insured and I get 270. If it costs 400 to rebuild then I get 75% of that, which is 300.

Taken from the link above,

For example, in the case of a house insured for €270,000, where the total reinstatement cost was €360,000, the insured party may only receive €270,000 to reinstate the house in the event of the total loss. In that situation the insured party may be obliged to provide the balance of €90,000. Similarly, if there is a partial loss, which costs €60,000 to repair, the insured party may only receive €45,000 and would have to provide the balance of €15,000.

Sunrise_Sunset

Is there an up to date calculator to work out rebuilding costs?

Is the one above the most accurate?

I've had at least 2 emails from my insurance provider this year warning of this too. Policy is up for renewal in a couple of months.

the_amazing_raisin

I wonder what data the calculator uses to determine the cost per square meter

For example, it probably costs less per square meter for a developer to build 200 houses in an estate since they can get better economy of scale

Whereas a rebuild and repair would essentially be a one off job, adding extra costs

In addition, given the construction industry is a tad busy at the moment, I wonder how long it takes to actually commence the rebuilding work

I imagine between getting the insurance payout and contracting a builder to do the repair work you'd be doing well to start rebuilding within 6 months

In the meantime you have to pay rent on somewhere to live, plus mortgage payments on your burnt down house

It looks like insurance will cover some of it, Aviva for example covers temporary accommodation up to 15% of the insured value.

For an insured value of €300,000 that's €45,000 potentially, which is probably enough to cover rent during the rebuilding work

Just another thing to consider

Sunrise_Sunset

What if any renovations were done on the property? An attic conversion, or kitchen extension etc. How do you properly incorporate that for insurance purposes?

the_amazing_raisin

https://www.boards.ie/discussion/comment/120474197#Comment_120474197

Using the calculator you'd basically add in the extra floor area of the renovations

You could also get the house professionally valued, should be more accurate