With construction costs on the rise, is your home properly insured?

What’s the point of home insurance anyway? If you break a window or drop the telly, you probably won’t claim – it might increase your premium. The big reason most of us pay is fear, or because your mortgage terms require it. If your home is badly damaged or destroyed, insurance will pay to rebuild it. If your house is underinsured, however, you could be in trouble.

Up to one million Irish homes may be underinsured, according to estimates by one insurance broker. An internal review of thousands of customer renewals by online broker Insuremyhouse.ie published in January indicated that up to half of all homeowners are underinsured by up to 30 per cent. This is because construction costs have rocketed since many of us took out policies. That’s fine if you are happy to rebuild your house a third smaller. If it’s the full house you want, it’s time to chat to your insurer.

“Take the worst-case scenario and your house is destroyed by fire; for a lot of people out there today, the sum insured will not rebuild the house the way they had it. That’s the bottom line,” says managing director of Insuremyhouse.ie, Johnathan Hehir.

To rebuild a three-bed semi in Dublin will cost around €218,000 according to the Society of Chartered Surveyors Ireland house rebuild calculator. That’s based on construction costs from April 2021. The same house in Cork would cost €175,000 to rebuild and €140,000 in the northwest, according to the figures.

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That doesn’t include reinstating your fancy kitchen, bespoke built-in wardrobes, hardwood floors, fences, garage, your new home office extension or garden room, by the way.

The cost of both materials and labour have increased even more since last year, of course. The BNP Paribas Real Estate Construction Purchasing Managers Index for May this year shows the second-fastest rise in input prices since the survey began in June 2000, just behind the record posted in October 2021. Annual inflation for building and construction materials was running at 18.2 per cent in April; the price of some materials such as metal and wood had jumped by between 50 per cent and 60 per cent. Yikes.

What many homeowners don’t realise is that if there was a partial loss, such as a fire in the kitchen extension costing €80,000 to repair, they will only receive €60,000

If the rebuild cost of your home is €280,000 and you only have it insured for €210,000, you will be facing a €70,000 shortfall when rebuilding it. What many homeowners don’t realise is that if there was a partial loss, such as a fire in the kitchen extension costing €80,000 to repair, they will only receive €60,000 in compensation. This is because the property is only insured for three-quarters of its rebuild cost, so all claims are treated pro-rata. “Nobody cares about it until there is a serious incident, until then, people don’t care,” says Hehir.

Increase your cover

Increasing your cover won’t necessarily increase your premium, or at least not by very much. That’s why it’s a no-brainer. A small bit of leg work will get you appropriately covered and it may even reduce your premium.

The hard and fast rule of getting the best value from any provider is not to auto-renew blindly every year. Yes, it’s easier to let things roll over and accept the quote they send you, but this is one call that could save you on your premium as well as tens of thousands of euro and a tonne of heartache if the worst happens.

If you have building insurance for €250,000 and contents insurance for €50,000, for example, ask your insurer how much it would cost to increase the building insurance to €300,000. With that quote in your pocket, shop around or go to a broker who will shop the market for you.

One owner of a four-bed detached house in Wicklow recently received a renewal quote of €353 from his insurer for a €382,000 rebuild cost. A phone call to that insurer and a brief haggle saw the premium drop to €319 with building cover increased to €450,000. He might have done even better had he shopped around.

Insurance companies have spent years charging loyal customers more than new customers for their home and car policies. Customers who stay with the same home insurer for nine years or more end up paying 32 per cent more than one renewing for the first time, according to a report by the Central Bank last year.

Price walking, where consumers are charged higher premiums the longer they remain with an insurance provider, has been outlawed in Ireland since July 1st. The new rules mean insurance providers won’t be able to charge existing customers a higher premium on renewal than any other customers with the same risk profile who have been with the insurer for a year or more.

Shop around

The new rules don’t mean you shouldn’t still shop around. Incentives for new customers are still allowed. “Had new-customer discounts been banned, there was a concern that consumers who were savvy and took the time to search for better value each year would have been penalised,” says Daragh Cassidy, head of communications with Bonkers.ie. “Banning new customer discounts could also have had a detrimental effect on competition.”

The Competition and Consumer Protection Commission (CCPC) provides a useful checklist that might help you get a discount for your existing or new insurer. Some providers will ask these questions as part of their quote process. If they don’t, mentioning them can save you a few bob.

Is someone living in the house over 50? Is someone usually there during the day? Is the household non-smoking? These things can make a difference. Does your house have an alarm? Is it monitored? Do you have security locks on the doors and windows, or do you live in a neighbourhood watch area? These factors may make your house a less risky bet for an insurer. Having a smoke detector can help, too.

Other discounts

Some insurers are looking at giving an additional discount for a good BER. So, if you are in a new or retrofitted home, this is worth a mention. Having no previous claims, or for some insurers, having no claims in the past three years will count too.

The one thing most customers forget to mention is their car policy. “Sometimes you will get a discount if your car insurance is with that provider too. The policy doesn’t even have to be through the same broker, it can be through a different broker or direct with the insurer. It’s worth having that information to hand before you ring for your house insurance,” says Hehir.

You can often get a discount on your premium if you agree to higher excess, too. This is the amount you pay towards any claim before your insurer pays the balance. It’s normally between €100 and €500 for standard claims, so figure out what you are comfortable with. Remember, the policy with the lowest premium isn’t always the best. Know what is covered.

Contents insurance covers the movable objects in your home. They should be insured for the amount it would cost you to replace them if they were stolen or damaged. From carpets to crockery, jewellery to appliances, the CCPC.ie website has a useful room-by-room checklist for logging items and estimating their value. When taking out a policy, check whether the contents of your garage or shed are covered and include them in your calculations if they are.

High-value items such as rings or paintings should be listed separately. Having receipts, if not photos, of these items will speed up claims. “We had a case not so long ago and there was a bit of an issue over a ring and when we were able to produce the photos showing the lady wearing it, all the issues went away,” says Hehir.

‘If you say you have an alarm and you haven’t turned it on in a couple of years and you don’t even know if it’s working, you would be punished for that at the time of the claim’

It’s all very well getting an alarm discount, but if you never turn it on, this will be a problem when it comes to claiming. “If you say you have an alarm and you haven’t turned it on in a couple of years and you don’t even know if it’s working, you would be punished for that at the time of the claim,” says Hehir. “They could say we are not going to pay out, or we are going to reduce the amount of the claim,” he says.

Similarly, if you said you had a monitored system but you cancel the monitoring, tell your insurer. If you have an alarm discount, ask them how much of a discount you are getting. If it’s €20 and you are not religious about setting it, say no to it.

Other things that can play havoc when claiming is if the house is unoccupied. If you are staying elsewhere during building works, your house insurer needs to know. “If you are not in the house and there is building work going on, the insurer will reduce your policy to fire and liability cover while it is unoccupied. If you didn’t tell them, you would have a serious problem,” says Hehir.

The same applies to landlords whose properties are unoccupied during works. If an older householder is in nursing home care or they have decided to decamp to Spain for a few months, the insurer needs to be informed too, says Hehir. “If something happens while the house is lying idle, you could have a serious problem getting a claim paid.”