Warning to Cork homeowners – mind ‘the insurance gap’ – as rebuild costs in the county increase by well above 6% in 3 years
“Cork homeowners are undervaluing their homes – and it could end up costing them thousands”
Cork homeowners could be leaving gaps in their insurance of anywhere from €4,000 to €35,000 and above, leaving them hugely exposed in the event of a claim. This is according to the experts at Peopl.ie who are reporting undervaluations of up to 18% in home insurance customers nationwide.
With the most recent figures from the Society of Chartered Surveyors in Ireland showing that rebuild costs in the county have shot up by 6% between 2019 and 2021, and inflation rates in Ireland having hit 6.7% since, Peopl.ie are warning homeowners that the increases in construction costs have a direct impact on their home insurance policies – whether they know it or not. The CSO has recently announced that building and construction materials rose by a shocking 16.9% over the past year, all of which affects the cost of home repairs and rebuilding.
The nationwide provider of home and life insurance has compared sums insured on the properties of their clients with average rebuild costs as calculated by the SCSI on similarly properties, and found that, across the board, people are effectively and unwittingly “low-balling” what their home cover needs to be.
Paul Walsh, CEO of Peopl.ie is warning that this gap in cover is definitely going to impact hundreds, if not thousands, of Cork homeowners.
“When we looked at our own national database and compared the ‘sum insured’ on say a 2-bed home with the cost of rebuilding that same property, we saw that policy holders were massively underinsuring their homes – by as much €25,000.
This is an easy mistake to make – we can see how people might arrive at a lower sum insured than is necessary. Homeowners mightn’t have reviewed their property rebuilding valuation in a number of years, or perhaps they just used the SCSI average when they purchased their property and have not since updated their policy to reflect the changes in building and construction costs in the intervening years. SCSI figures indicate that average re-build costs in Cork increased by an average of 6% in the 18 months to March 2021, and it is safe to assume that this figure has risen since with inflation running as high as it is. As it is the rebuild cost that determines the amount your house is insured for, it is vital that you keep your policy up to date with current prices.”
Mind the Insurance Gap – it Could Cost You
Peopl.ie want to highlight the common confusion around this issue for homeowners and ensure that customers are in the know when it comes to avoiding a potentially costly gap in cover in the event of having to make a major claim.
Mr. Walsh went on to explain,
“There is a general and pervasive assumption out there that if your sum insured on your policy is, say, €300,000, then if the costs incurred as the result of damage to your property amounted to that much or more, you would receive that from your insurer. However, unfortunately this is not the case! Claims are generally awarded on a pro-rata basis, so if you have knowingly or unknowingly undervalued your house – insurers will only pay out the amount for which you valued your property. So, if we look at that house which was insured for €300,000, but its actual rebuild cost is more like €400,000 – this means it was undervalued by 25%. In which case the insurer will only pay out a maximum of 75% of the €300,000.”
Another common error made by homeowners highlighted by Peopl.ie is not reflecting the value of any extensions or refurbishments in the sum insured on their property.
Mr. Walsh advised,
“If you have significant work done on your home – like an extension or attic conversion, then this should be factored in when calculating your home insurance. There is very little different in the cost of premiums, but if something happens it will save you a lot of money.”
Mr. Walsh concluded,
“Review your paperwork and make sure that the value you have insured your property for tallies with the current rebuild cost. Don’t get caught out by falling in that insurance gap.”