Warning as owners underinsure their properties by up to €35,000

OWNERS expose themselves to enormous risks if they have to make a claim with their insurance.

A study by Peopl.ie insurance found gaps of up to €35,000 in insurance cover for a typical household.

Homeowners understate the sums insured on their cover by around 18% on average, said Peopl.ie, which offers its products through credit unions.

The home and life insurance provider has compared the sums insured on their clients’ properties with the average reconstruction costs calculated by the Society of Chartered Surveyors Ireland (SCSI) on similar properties.

He found that people involuntarily “expect” what their home coverage should be.

Peoplel.ie chief executive Paul Walsh has warned that the coverage gap will affect hundreds, if not thousands, of homeowners.

It also highlighted a widely held assumption among homeowners that could end up costing them thousands of dollars.

“When we looked at our own database and compared the ‘sum insured’ of a two-bed house in Dublin with the cost of rebuilding that same property, we found that policyholders were massively underinsuring their homes – up to ‘at €35,000.”

The insurer made similar comparisons for three- and four-bed properties and found large gaps in coverage on three-bed homes and smaller gaps on four-bed homes.

Mr Walsh said: ‘It’s an easy mistake to make. We can see how people might come up with a sum insured that is less than what is needed. »

He said the owners may not have seen their property for a number of years, or they may have simply used the SCSI average when they purchased their property and did not update their policy to reflect changes in building and construction costs in the intervening years.

“As it is the cost of rebuilding that determines how much your home is insured for, it is essential that you keep your policy up to date with current rebuilding costs.”

Mr Walsh said there is a general and pervasive assumption that if the sum insured on the policy is, say, €300,000, then if the costs incurred as a result of property damage amounted to that amount, the policyholder would receive this from your insurer.

“However, that is not the case. Claims are awarded on a pro rata basis, so if you knowingly or unknowingly undervalued your home, insurers will only pay the amount for which you appraised your property.

This means that if a house is insured for €300,000, but its actual cost to rebuild is €400,000, then it is undervalued by 25 pc.

The insurer will only pay a maximum of 75% of the €300,000.

Another common mistake made by homeowners highlighted by Peopl.ie is not reflecting the value of extensions or renovations in the sum insured on their property.

He said that if major work is being done on your home, such as an attic extension or conversion, this should be taken into account when calculating your home insurance.

“There is very little difference in the cost of premiums, but if something does happen it will save you a lot of money.”

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