People undervaluing their homes by up to a third. Warning to homeowners – mind ‘the insurance gap’ – it could cost you thousands

Irish 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.

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 homeowners. He has also highlighted a widely held assumption amongst homeowners that could end up costing them thousands.

“When we looked at our own database and compared the ‘sum insured’ on say a 2-bed home in Dublin with the cost of rebuilding that same property, we saw that policy holders were massively underinsuring their homes – by as much €25,000. We ran similar comparisons for 3- and 4-bed properties and yet again found huge gaps in cover.

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 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. 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 rebuild costs.”

Peopl.ie Data Price SCSI Price
Dublin 4-Bed €261,421 Dublin 4-Bed (Semi-D) €265,736
Dublin 3-Bed €194,594 Dublin 3-Bed (Semi-D) €217,550
Dublin 2-Bed €136,928 Dublin 2-Bed €161,140

https://scsi.ie/wp-content/uploads/2021/03/SCSI-House-Rebuilding-Guide-2021-final-002.pdf

Peopl 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, this is not the case! Claims are 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.”