Underinsurance
As your insurance provider, we are writing to all our customers to encourage them to check that their homes are adequately insured to avoid the risk of underinsurance.
What is underinsurance?
Underinsurance occurs when you insure your buildings and contents for less than the amount it will cost to rebuild or replace it. Your property, including domestic outbuildings, should be insured for the full rebuilding cost. This includes the cost of removing debris after a loss, any architects', surveyors' and other professional fees as well as any additional costs necessary to meet current building regulations and specifications. You do not insure for the market value of your property. Your contents should be insured for the full cost it would take to replace all household goods and personal belongings in the home as new.
How can underinsurance affect my policy?
If you underinsure your home, you may not receive the full amount necessary to rebuild, repair or replace it in the event of partial or complete damage. Claim settlements may be reduced if your buildings or contents sums insured, at the time of any loss or damage, are less than the full rebuild cost or replacement cost.
Example A: Partial Damage | Example B: Complete/Total Loss |
|---|---|
Mr.and Mrs.X have their home insured for €180,000. | Mr.and Mrs.X have their home insured for €180,000. |
The cost to fully rebuild is €300,000. | The cost to fully rebuild is €300,000. |
This means it is underinsured by €120,000 (40%). | This means it is underinsured by €120,000 (40%). |
Fire damage occurs to the kitchen. | Fire damage occurs to the house requiring a complete rebuild. |
It will cost €100,000 to repair. | The cost to fully rebuild is €300,000. |
As the house has been underinsured by 40%, a deduction of 40% is made from the cost of the repair. Therefore, the most Mr and Mrs.X will receive in a claim is €60,000**. | As the house has been insured for €180,000, the most Mr.X and Mrs. X will receive in a claim is €180,000**. |
**Subject to terms, conditions and exceptions of the policy. | **Subject to terms, conditions and exceptions of the policy. |
How can I estimate an adequate sums insured value?
Correctly estimating the amount to insure your home and contents for, including personal possessions, is key in preventing underinsurance. Take time when first arranging your policy to check if the amounts you intend to insure your home and contents for are adequate. Remember, failing to arrange adequate cover will reduce your chances of covering the cost of repairs or entirely replacing your home in the event of loss or damage.
What do I need to do?
Reviewing your sum insured regularly is key to preventing underinsurance
Reviewing your Policy Cover - Whilst underinsurance relates to the amounts you have insured your home for, it is still important to review to your policy cover regularly to ensure it continues to meet your needs, especially if you have made any additions or upgrades. You can do so by reviewing your policy documentation (Policy Schedule and Statement of Fact) together with your policy booklet.
Keep us informed - Keeping us informed of changes to your home, such as those listed above, will mean you are best protected in the event of a loss or damage.
Note: If you do have any queries in relation to this communication please contact your Insurance Broker.
Consider the following when working out how much cover you need:
The Society of Chartered Surveyors Ireland (SCSI) provides both a guide and a House Rebuild Calculator to assist you in insuring the buildings of your home you should go to www.scsi.ie
The SCSI point out that the rebuild figures in their guides are based on estate style houses and do not cater for Victorian, Georgian, other period type houses and houses of non-standard construction such as properties with flat roofs, roofs of non-standard construction and thatch properties .For these type of houses you should have a reinstatement cost assessment carried out by a Chartered Quantity Surveyor.
They also provide a link to find an expert should you determine your home is best assessed by a local Chartered Quantity Surveyor. - https://scsi.ie/consumer/build/calculator/
Additions and Upgrades - Upgrades or additions to your home, including contents and personal possessions, may change the amount you need to insure your home for. Items such as a new sofa, laptop, television, or carpets may increase the cost to replace all contents as new. Installing a new kitchen, office, bathroom or fitted wardrobes may require a review of the cost to rebuild your home.
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Email: info@obf.ie
Call: +353 1 660 1033