Homeowners overpaying insurance due to slump
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HOUSEHOLDERS are wasting thousands of euro because their homes are over-insured, a leading insurance body warned yesterday.
The sharp drop in construction costs resulting from the building slump means many homeowners are over-estimating what it would cost to rebuild their home if it was destroyed.
Many people are paying home insurance premiums based on rebuilding costs that prevailed at the height of the property boom, the Professional Insurance Brokers Association (PIBA) said. But construction costs have since crashed and homeowners should review their insurance cover, Diarmuid Kelly of PIBA said.
The warning comes a day after the Financial Regulator told consumers they can save €400 by seeking out the best insurance quotes.
Cost
PIBA's Mr Kelly said people often don't realise that when it comes to home insurance they need to look at the rebuilding cost and not the market value.
"The rebuilding cost of your home is significantly lower than its market value as you already own the site," Mr Kelly said.
He added that people living in apartment blocks have a greater tendency to be over-insured.
Insurance for the block would normally cover the actual apartment. In such cases people need only concern themselves with insurance cover for the apartment contents.
People are also likely to be paying too much insurance on the contents of their house if they were using a percentage of the house rebuilding costs to value the contents.
Mr Kelly said people should check the cost of rebuilding their home on the website of the Society of Chartered Surveyors, www.scs.ie which gives an indication of the cost per sq ft of rebuilding homes in different parts of the country.
The PIBA warning comes on foot of a similar warning from the Financial Regulator.
Premiums
A Financial Regulator probe revealed that a wide range of premiums were being offered by insurers providing cover.
Using five different types of houses -- different ages, sizes, location and costs to rebuild -- the body detailed quotes from nine insurance companies.
These included AIGDirect, Allianz, AXA, FBD, Hibernian Aviva, Lloyds via Getcover.com, Quinn Direct, Royal and Sun Alliance and Zurich. The investigation found that, depending on the provider, there were differences in premium quotations and excess figures -- the first part of any insurance claim you have to pay yourself.
Lloyds was the cheapest in all cases, although some of its quotes are based on having contents insured for a certain amount, while AIGDirect was the most expensive in three out of five instances.
The Financial Regulator said people should insure their homes on the basis of how much it would cost to rebuild it.
- Charlie Weston Personal Finance Editor
