Don’t fall into the trap of over-insuring
THE biggest mistake people make with house insurance is over-insuring. That means it’s easy to fix, and switching for a better deal will make it better again.
You might think that it doesn’t matter — after all, you’ll get back what you’re insured for, right? Wrong. An insurer is only obliged to pay out the value of the items lost, whether by theft, fire or damage. In some policies, that means you only get today’s value, not the cost of buying new.
It means that say your house floods in winter and your downstairs furniture is ruined, instead of the €10,000 you think you’re covered for, in fact, it may be assessed on the current value of items. That means you only get back what your 10-year-old sofa is worth today… and that’s after any excess on the policy is paid.
You’ve overpaid for nothing.
Add to that the lazy practice of many insurers covering your ‘contents’ for a percentage value of your ‘buildings’ cover, and it’s a recipe for price hikes across the board.
Don’t worry, this is one bill you can reduce by switching and saving. You mightn’t even need to change your company!
There are three components to most household policies...
1. Buildings: This is the amount that will be paid out if your house is structurally damaged, either by fire or perhaps things like flooding, burst pipes or something crashing into it.
The fatal mistake is costing it at what your house is valued (i.e. what it would sell for).
This is generally much higher than the actual cost to rebuild, which is all you need have.
For example, a four-bed semi in Terenure, Dublin 6, measuring 1,400 sq ft costs on average €595,000 to buy. Its basic rebuild cost, however, is just €242,431. The difference in insurance premiums is huge.
To get the correct figure, see the Society of Chartered Surveyors website (www.scsi.ie) — they have a handy rebuild guide price based on the type and location of the property.
2. Contents: The ‘stuff’ in your house, from furniture to electricals to clothes. It will take a little time, but try and add it up (go around with a paper and pen and guesstimate).
You’ll be surprised how low the figure is compared to the cover you’re paying for.
Policies will only pay out on the actual value, not what you have insured for unless you have a ‘new for old’ clause written in. And that’s less the excess!
3. All risks: Most policies have a ‘per item’ limit on contents cover and it can be as low as €1,000, but is normally €2,000. If you have jewellery, art, laptops, etc worth more than this, they must be covered under ‘All Risks’ separately.
You can expect to be asked for valuations, pictures, etc.
Once you’ve calculated the figures correctly, use a broker to requote you. Or call your own insurer and see if you can switch to a lower-priced policy.
How to switch ...house insurance
Find out the rebuild cost of your home on www.scsi.ie,
using square footage and location, along with your
Add contents value by calculating it properly.
Create ‘All Risks’ list from items valued at more than
Ask a broker to quote you based on new figures or see
www.chill.ie or www.insuremyhouse.ie to compare a
range of insurers.
Complete the application form and direct debit. If you
can afford to pay in one go, you will save even more.
Potential saving: €300 p.a.
Total time: 3 hours
- Cheaper cover for mortgage protection
- Homing in on savings: Financial rewards for changing mortgage are worth it