At PCLA we have noticed in recent times during claims we are handling that there is an increase in the number of property’s which are underinsured. Most of the time the property owners we are representing have not been aware that this is the case until we are in the middle of the claims process when at this stage there is very little that can be done to rectify this.
Underinsurance has become such an issue as many property owners renew their policy and don’t give much taught to the value they insure their property for and keep it the same for many years or since the inception of the policy. However as construction costs continuously change, the value you insure your property for should be something which you check every time you renew your policy. This is important as most insurance policies now contains a clause called “average” which will reduce the level of settlement on any claim to reflect the level of underinsurance in place at the time of loss.
To put it simply underinsurance is where a property is insured for less than it would cost to rebuild it. An example would be if a house was insured for €150,000 and the price to rebuild this house is €200,000 then there is underinsurance of 25%. Any settlement of any claim made will then be reduced by this percentage.
When considering how much you should insure your property for you should take into consideration that this figure needs to take into account a total loss and needs to include demolition and removal of the entire building, site security during the construction stage, rebuilding/reinstating the building to current building and local authority regulations at the time, inflation costs during property construction and professional fees for Architects, Engineers or any other professionals needed for the reconstruction.
A common mistake property owners make when insuring there property is to use the market value as the insured value of the property, when in practice they bear no similarity and this value should not be used when assessing how much to insure the property for.
The SCSI or Society of Chartered Surveyors of Ireland set the rebuild rates which are used by insurers to calculate the value at risk to ensure you are adequately covered. They will however only check this during the course of a claim and will not tell you during your renewal or when taking out a policy if the figure you provide them is sufficient and will just assume it is correct. When calculating the level of cover needed for your property there are tools to help. The best of these is to use the SCSI rebuild calculator on their website. This will ask you to fill in details on the size of the house, the type of house and the area the house is located. It will then give you a figure which can be used to identify what your property should be insured for. It will also ask if there is any garage or outbuildings, boundary walls/fencing, or high grade finishes inside the property as these all need to be taken into account in the value the property is insured for. The link below will bring you directly to this rebuilding calculator:
https://scsi.ie/consumer/build/house-rebuild-calculator
If you have any questions at all regarding any of the points mentioned above, please feel free to reach out to one of our qualified team members at info@PCLA.ie and we would be delighted to advise you.
