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Building costs rise means half of homes are now underinsured

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Stock image. Photo: Ken Finegan/www.newspics.ie

Stock image. Photo: Ken Finegan/www.newspics.ie

Stock image. Photo: Ken Finegan/www.newspics.ie

Up to a million homes could be underinsured, which could lead to reduced payouts for owners if they have to make a claim.

Huge increases in building costs mean up to half of all homeowners could be underinsured by between 10pc and 30pc, according to a survey of thousands of customer renewals by online broker Insuremyhouse.ie.

The broker said the increased building costs were not being reflected in the rebuild cost policyholders were placing on their homes.

Properties need to be insured for the cost of rebuilding them in the event of a fire or some other major event, and not the market value of the property.

Rebuilding costs have increased by around 21pc since 2016.

Insuremyhouse.ie managing director Jonathan Hehir advised homeowners to check their policies to ensure they had an accurate rebuild cost submitted.

He said this would avoid the potential for significant financial shortfall in the event that an insurance claim needed to be made to rebuild a home due to total loss, such as fire.

“At renewal time policyholders should use the opportunity to reassess not only the cost of their premium, but also the details of what they are covered for, including the rebuild cost of their home,” he said.

He said many homeowners openly admitted they had not considered this in the recent past and so the sums insured had not changed.

This meant these people were underinsured and therefore financially exposed in the event of a claim.

According to the Society of Chartered Surveyors, house rebuilding costs have increased by up to 23pc over the last five years. The cost of rebuilding an average three-bedroom, semi-detached house in Dublin is around €218,000. It costs €175,000 in Cork, and €140,000 in the North West.

Mr Hehir said: “When homeowners do increase the sum insured on their policy, the level of increase varies from 10pc up to 35pc, and sometimes more. Luckily, the premiums don’t necessarily increase in proportion to the sums insured.”

When calculating the base rates for rebuilding, costs would be calculated on a total loss situation, he said. In other words, the building has been totally destroyed and has to be demolished, the site cleared, and the house completely rebuilt.

But the costs do not include contents such as carpets, curtains, furniture and white goods and appliances. These are covered under the contents section of the insurance policy. 

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