Building insurance protects a property against damage. The buildings section of a household insurance policy protects your home in the unfortunate event that something happens, that would require a full rebuild of the property.
The most important thing when considering building insurance is to accurately calculate the buildings sum insured. The sums insured are reflected in your home insurance schedule and this is the amount that your property will be insured for.
When calculating these figures, a number of things need to be considered. The current cost of rebuilding the property, the bricks and mortar. Along with materials, construction labour costs need to be taken into account.
Why do you need buildings insurance?
You are not obliged by law to insure your home but it is advisable. Think about how you would afford to rebuild your house if it were damaged or destroyed. Usually if you have a mortgage, lenders will insist that your house is properly insured. Properly being the operative word. Building costs and inflation are at an all-time high and this has a knock-on effect on property insurance.
Whilst it is thought that building costs have started to stabilise data from the Central Statistics Office (CSO) shows that labour costs in the construction industry rose further from €23.75 per hour in Quarter 4 of 2021 to €24.90 per hour in Quarter 4 of 2022. CSO statistical publication, 28 February 2023. Because of the increase in costs there is an increased risk of under-insurance of homes.
There is a possibility that many homeowners properties are under-insured especially if the buildings sum insured are not being re-calculated regularly.
According to a Central Bank review in September 2022 under-insurance in the home insurance market increased steadily over a five year period. An average of 16.5% of paid claims were under-insured in 2021 compared to 6.5% in 2017. It is really important to make sure your property is insured for the rebuilding cost and not the market value of the property. For example a property worth €500,000 to buy might only cost €300,000 to rebuild and this is the amount you should insure your home for.
If you are underinsured it means that, should an incident arise, and you make a claim, you may have to pay costs from your own pocket that you might assume to be covered by your insurance policy. On the other hand, if your buildings sum insured are too high, you will be paying too much for your insurance policy.
This is enough to warrant a review of your policy and the existing sums insured. By becoming familiar with these calculations, moving forward you will be in a better position to gauge where savings can be made on your annual home insurance bill and when shopping around for home insurance.
The central bank further suggests “that you review the level of buildings on a regular basis (including 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.” “The key thing is that the level is appropriate to what you need.” Central Bank of Ireland (2021).How can I avoid being underinsured in my home.
How do you calculate the Buildings Sums Insured?
Unless you’re a full-time quantity surveyor chances are you will not know exactly how to calculate the rebuilding cost of your home. You need to find a reputable source of information. You can find this on the society of chartered surveyors Ireland website. There you will find a rebuilding cost calculator. This will give you a good indication of what your sums insured should be. SCSI Re-build Calculator.
When you log onto their website simply follow the instructions and you will find a table of average detailing the rebuilding costs per square meter for different house types in different regions. This should give you a good indication and there is plenty of detail there, they even explain how to measure your home.
If you have recently added a garden room or office, you will have more detail to consider to arrive at the correct buildings figure. This can be more complex and, in that instance, you could always seek advice from a local chartered surveyor, you will find a list of registered surveyors on SCSI.
Whatever you decide insurance rates change monthly, they can go up or down. There is no harm in checking it out every year at renewal.
At Mike Murphy Insurance we have been arranging home insurance for our customers for over fifty years, let us do the work for you. We research the Irish insurance market every year for our customers, verify the sums insured and offer the most competitive price first. Going that little extra mile will give you peace of mind that your home is protected, and it could make a difference and even save you money-it’s definitely worth a try.
Review your buildings insurance today! Log onto Mike Murphy Insurance or request a call back and we will call you when your home insurance renewal is due.
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