Buildings Insurance

Increased costs in the construction industry means many customers are at risk of not having
sufficient buildings property insurance cover. It is your responsibility as the property owner
to have the correct level of buildings insurance in place. Being underinsured could be costly.

What is underinsurance?

Underinsurance occurs when you insure your buildings and / or contents for less than the
amount it will cost to rebuild your buildings or replace your contents.
When you are underinsured, the ‘Conditions of Average’ may apply in the event of a claim,
this means your insurer will only a portion of any claim if you have accidentally or
deliberately underinsured your buildings and or contents.
The ‘Conditions of Average’ is best illustrated with an example:
 Brendan insures his home for €200,000 buildings insurance, he suffers fire damage
to the property and suffers €100,000
 Upon investigation by the insurance company, it becomes apparent that Brendan
has underinsured his property and the correct level of insurance should have been
€400,000
 Therefore, the condition of average is applied to the fire claim as follows;
Claim Settlement by Insurance Company
Sum Insured €200,000
________ x €100,000 (Fire damage) = €50,000 claim payment by insurance
company
Rebuild Cost €400, 000
As Brendan was 50% underinsured the insurance company will only pay 50% of the claim
leaving Brendan to have to pay those for himself.

Why is this an issue now?

We are all managing an increase in the cost of living, including a rise in the cost of building
and materials generally.

Because of these increased costs there is an increased risk of under-insurance of homes.
The Central Bank has found that under-insurance in the home insurance market has steadily
increased over the last five years. Make ‘under-insurance in the home insurance market has
steadily increased over the last five years’
An average of 16.5% of paid claims were under-insured in 2021 compared to 6.5% in 2017.

How can you avoid underinsurance?

You should review the level of buildings and contents cover you need on a regular basis
(especially when you are renewing your insurance).  

This means focusing not just on the cost of the premium alone but also on making sure it is
providing you with the right level of cover.
In some cases, you might look at the level of cover and find that it is too high, e.g. for
contents, and in such a case you should consider reducing it, which can reduce your
premium.

The key thing is that the level is appropriate to what you need.
Some of the reasons to review your level of home insurance (building and contents cover)
include:

When you undertake any home improvements, such as installing a new kitchen or bathroom
When you build an extension
When prices increase.
When renewing or taking out a new home insurance policy, think about when you last had
your house valued. This valuation is not the same as what an estate agent may value your
house for sale purposes. You need to consider re-building costs, fire brigade, architects,
engineers, removal of destroyed property etc.

If it has been a number of years, you should consider taking a look at what value you have
insured your house for, including the cost to rebuild.

You may wish to consider using a property valuation service. Alternatively, online tools –
such as the Society of Chartered Surveyors Ireland house rebuild calculator
– can help you estimate the rebuild cost.

There is no right or wrong answer to the correct level of buildings and contents insurance,
but being underinsured is not a desirable place to be.

Check out the very useful information on the Central bank website, link below, they also
how insurers to account for not keeping consumers aware of changes in the market place.

https://www.centralbank.ie/consumer-hub/explainers/how-can-i-avoid-being-under-
insured-on-my-home

The information in this article is only to be used as a guide. Mannix Property Services
advises all parties to seek professional advice from a Chartered Quantity Survey, it is
too big a decision to leave to chance.

Thinking of selling or leasing your property in Kerry and beyond?

We at Mannix Property Services sell and lease properties across Kerry and beyond.

Please register your details here and our Client Services department will be in touch to see
how Mannix Property Services can help. Alternatively, call Brendan on 086 050 8804
Check out our blogs section for sellers tips, buyers tips, market updates and advice on how
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