Soaring construction costs prompt 7 in 10 to put home improvement plans on hold
- Underinsurance risk: More than half of homeowners who renovated their properties haven’t told their insurer
- More than 7 in 10 homeowners and renters in Ireland are putting home improvement plans on hold due to soaring building and construction costs, with men (67%) more likely than women (53%) to press pause on their plans.
This is according to the findings of a new survey by Peopl Insurance, which examined the impact of the cost-of-living crisis on people’s home renovation plans.
The survey also revealed that more than half (55%) of those who embarked on major home improvements over the last five years are now at risk of being underinsured because they have not told their insurer about the renovations.
Commenting on the survey findings, Paul Walsh, CEO of Peopl Insurance said:
“The rate of construction cost inflation may have moderated this year, but construction inflation is still high and it’s to be expected that people will have to put home improvement plans on hold as a result. There have been notable increases in wholesale prices for certain basic construction materials including plaster (up 20% over the last year) and cement (up 15%). For many people however, this is a double-edged sword because a home renovation or upgrade could actually reduce the cost of running their home, and help to shield them from the higher living costs so many are grappling with today”.
Peopl have issued a word of caution to the three in ten people who are planning to press ahead with their home refurbishments, and to the more than five in ten (55%) who have already made improvements but haven’t alerted their insurer,
Mr. Walsh advised:
“Failure to inform your insurer about a major home improvement significantly increases your risk of being underinsured. A major home upgrade – such as an extension or attic conversion – can substantially increase the market value of your home as well as the cost of rebuilding it.
However, unless you have notified your insurer of the upgrade, as well as any consequent increase in the rebuild cost of your home, you risk only getting a fraction of the payout you were expecting from an insurer if your home is damaged and needs to be repaired or rebuilt.
To ensure you are fully covered and don’t get caught out by underinsurance, it is imperative that insurers are notified of any major home improvements and any higher home rebuild cost that arises at the foot of such upgrades. My guess is that most people don’t actually know they need to communicate this to their insurer.
It could also be the case that some people may be reluctant to notify their insurer of such renovations in case they push up the cost of their home insurance by doing so – however, the premium might not increase at all and even if it does, better to be fully covered than in the perilous financial situation of being underinsured.”
Other highlights from the Peopl home improvements survey reveal that:
- As eight in ten (79%) of the working class4 have put home improvement plans on hold as a result of increases in the cost of construction material, this socio-economic class were much more likely than the middle class (64%) to have been restricted by buildings inflation.
- Women are more likely than men to inform their insurer if they have embarked on home improvements (52% versus 42%). The working class were also more likely than the middle class to have done so (56% versus 40%).
- Older people (over 55) are the most likely age cohort to take the important step of telling their insurer about a home upgrade with 62% of this category saying they did so.
- Dubliners were the most likely (58%) to notify their insurer of a home upgrade. Only four in ten (39%) of those living in Connacht and Ulster, and only one in ten (10%) of those living in Northern Ireland had done so.
Mr Walsh added:
“As general Irish inflation has been running at 5% or more for the last two years, Irish consumers have been battling sustained and high inflation for some time and as a result, it is the essentials that they usually prioritise rather than the likes of home improvements or renovations. If more people are to be encouraged to upgrade their homes or indeed to even be in a position to buy one, more must be done to bring down Ireland’s high building materials costs.
The Central Bank recently warned that there is an increased risk of homes being underinsured as a result of the rise in the cost of buildings and materials. So even if you haven’t embarked on a major home improvement, it is important to check that you have not underinsured your home. The correct method of arriving at the “sum insured” on your home insurance policy is to calculate the rebuild cost of your house. Home insurance claims are awarded on a pro-rated basis, so if your home is underinsured, insurers will only pay out the amount for which you insured your property, leaving you to foot the rest of the bill out of your pocket. Many homeowners are simply unaware of any of this and are underinsured as a result”.