Blogpost 11th Sept 2024: Underinsurance Continues: The rising costs of construction and inflation in Ireland have significant implications for homeowners and property owners alike. Ensuring that your property insurance is adequate is crucial to avoid potentially devastating financial consequences if you have a claim on your most valuable asset - your home. Recent figures suggest that Irish Consumers have underinsured to the tune of €39 billion due to the sharp increase in construction costs.
At Brady Insurance, we leverage over 65 years of experience providing home and property insurance cover to our clients to ensure you are fully protected. In this post, we want to help you understand ‘underinsurance’ and provide actionable steps to safeguard your property effectively.
What is Underinsurance?
Underinsurance occurs when the insured value of your property is less than the actual cost to rebuild or replace it. This discrepancy can result in reduced claims settlements, leaving you to cover the shortfall out of pocket. The Central Bank of Ireland highlights, "an increasing number of households in Ireland are under-insured on their home insurance policies".
The Irish Property Owners Association echoes this concern, warning of the "serious repercussions" of being underinsured, which can result in substantial out-of-pocket expenses.
What are these repercussions?
Underinsurance can have severe financial repercussions. For instance, if your house has a rebuild cost of €200,000 but is insured for only €100,000, you are only 50% insured. If you make a claim for €50,000, your insurer will only pay €25,000, leaving you to cover the remaining €25,000. Highlighting the financial strain underinsurance can cause, The Irish Property Owners Association warns, "if you were deemed 20% underinsured, your claim will be deducted by that 20%".
The Importance of Accurate Rebuild Costs
Rebuild Cost vs. Market Value It's essential to distinguish between your home's market value and its rebuild cost. The market value is what your home would sell for, whereas the rebuild cost is the expense to reconstruct it from scratch. The Society of Chartered Surveyors Ireland (SCSI) provides valuable resources, including a rebuild calculator, to help you determine accurate rebuild costs.
Inflation and Construction Costs:
Recent data indicates significant increases in construction costs. According to the SCSI, house rebuilding costs have risen by up to 23% over the last five years. This trend underscores the need to regularly review and update your insurance coverage to reflect current rebuild costs accurately.
Avoiding Underinsurance:
1. Use a Rebuild Calculator The SCSI's rebuild calculator here can provide a reliable estimate of your home's rebuild cost. This tool considers various factors, such as location, square footage, outbuildings, walls and driveways to ensure a comprehensive assessment.
2. Review Policy Details Regularly Understanding your policy's inclusions, exclusions, and limits is crucial. Regularly reviewing these details with our team can help ensure your coverage is adequate and up to date. We regularly reference market information and guides of loss assessors on the most recent constuction costs, so your broker is a useful resource to assist you.
3. Account for Property Improvements Any recent renovations or additions to your property can increase its rebuild cost. Once you inform our team, they will adjust your insurance policy accordingly to reflect these changes to avoid gaps in coverage.
4. Assess Contents Coverage Ensure that your contents are insured for their full replacement value. Conduct a thorough inventory of your belongings and update your policy accordingly to avoid underinsurance.
5. Consider All Risks Insurance All Risks insurance covers valuable items like jewellery, laptops, electronics and bicycles, both at home and on the move. This type of coverage can provide peace of mind, knowing that your valuable possessions are protected even when lost or stolen while with you.
How Brady Insurance Can Help
At Brady Insurance, we have decades of experience and a deep understanding of the specific challenges faced by homeowners. Our team can help you:
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Review Your Coverage: If your policy is due for renewal soon ensure you speak to us and revise the current values and talk to your broker to ensure the policy is the right one for you.
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Provide Expert Advice: Offer tailored advice on risk management and working out the right sums insured.
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Secure Competitive Rates: Access major insurers and benefit from competitive rates through our own schemes.
Take Action Today & Protect your home from the risks of underinsurance by reviewing your coverage with Brady Insurance.