FAQ Friday: What are my options if my home is under-insured?
October 28, 2022
On the last Friday of every month, we answer some of the most frequently asked questions (FAQ) from the hundreds of consumers who contact us. This month, we look at what you can do to help make sure your home is not under-insured, in case something goes wrong.
I recently extended my home; will this affect my home insurance?
Depending on your level of cover, home insurance can protect you against risks to your home and its contents, such as fire, water damage and theft.
Under-insurance is when you insure your home, or its contents, for less than the cost of:
- Rebuilding your home
- Repairing your home
- Replacing its contents
As you have extended your house, it may not be adequately insured. If you have to make an insurance claim, you may not be fully covered for your losses.
Being under-insured is a common issue. Recent research by the Central Bank of Ireland has shown an increase in the number of under-insured homes across Ireland. Many consumers may not even know they are under-insured.
Why has the cost of rebuilding my house gone up?
The main cause of under-insurance is the increased cost of rebuilding your house. This is largely due to the price of building materials going up in recent times.
Your house should be insured for its full rebuild cost. The rebuild cost is the amount you would have to spend to rebuild your house from scratch if it were completely destroyed. This may differ from the market value, which is the price of your house if you were to sell it.
For example, if your house has a rebuild cost of €200,000 but is only insured for €100,000, this means you are only 50% insured. If a total loss happens – where you need to rebuild your house from scratch – the insurer will only pay you a maximum of €100,000. You will have to pay the other €100,000 yourself.
How do I avoid under-insuring my house?
You should review the level of buildings and contents cover you need on a regular basis, especially when renewing your insurance. Talk to your home insurance provider about the right level of cover for you.
Your insurer or broker should inform you of the risks of being under-insured. They should give you relevant and clear information when you take out, or renew, your insurance policy. In the event of a claim, this may help you to avoid an insurance pay-out that doesn’t cover your costs.
To find out how much it would cost to rebuild your home, you can:
- use the Society of Chartered Surveyors Ireland’s free House Rebuild Calculator to estimate your rebuild cost, or
- get a property valuation service to value the cost of rebuilding your home.
You can find out more about home insurance.
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