Home Economics - Answering your property questions
Q. We have €400,000 on deposit after selling our house. We plan to rent for a few years as we will be moving between Ireland and two other European countries for work before buying again. However, we are worried about the security of our money after hearing about possible 'bail-in' legislation. What precautions can we take?
You are referring to the bank recovery and resolution directive which comes into force in January 2016. It effectively allows for 'bail-ins' to ensure that taxpayers are not first in line to rescue failed banks instead making bank shareholders and creditors (depositors) take the hit. The only bail-in so far has been in Cyprus where 14,000 depositors lost €4.3bn after the Laiki bank went bust but it did cause shockwaves across EU member states.
It is extremely unlikely such an event would happen here, but much of the financial crisis has been unprecedented. In any event, smaller depositors are legally covered up to €100,000 under the deposit guarantee scheme and would be unaffected either way. Shareholders and bondholders will be tapped first.
In your own case, a practical thing you can do is split the money among four banks (or separate accounts for each of you in two). This belt-and-braces approach will result in a bit of paperwork, but if you want to be absolutely certain of your money's security over the next few years, that's what I'd do.
Q. I had to make an insurance claim after the storms at the beginning of the New Year when water flooded the downstairs of my house. It is my first time to claim. I'm now worried about freezing pipes and another claim. Will my premium be unaffordable now?
The storm damage is expected to result in hundreds of millions of euro in claims but the insurance industry is used to dealing with bad weather events.
Households can act to safeguard against freezing pipes through a few simple steps, says Ciaran Phelan of the Irish Brokers' Association.
"Make sure that water pipes and water tanks in the attic are insulated with good quality lagging, know where the stopcock to turn off the water is located and make sure it works, repair any dripping taps as this will help prevent water freezing.
If pipes freeze, don't panic. Turn water off at the stopcock and thaw the pipes as best you can with a hairdryer. Switch off central heating and finally, contact your insurance broker for help and advice, how to make a claim and have the necessary repairs carried out.
Regarding your policy, it's there to cover the costs, so please use it. You probably have an excess which might now increase. And yes, it's certain the premium will increase at renewal, but so will everyone else's, so the cost for individual claimants will be mitigated.
A good broker will shop around for the best renewal quote at the time.
See www.iba.ie for a listing.