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28 Jun 2022

Warning to Longford homeowners to mind ‘insurance gap’

Homeowners

Longford 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

Longford 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 country have shot up by 7.3% between 201W9 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 similar 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 Longford 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 policyholders 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.

"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.”

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.”

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