Getting adequate insurance cover for your property and contents means doing some homework
As it’s a requirement in order to obtain a mortgage home insurance is one of those necessary expenses to which few of us devote much attention.
Indeed many of us will take the easy way out and opt for the policy offered by our lenders without putting too much thought into whether there is a better or cheaper option.
Weather events such as Storm Ophelia or last week’s combination of record snowfall and Storm Emma will tend to focus minds on the extent to which the homestead is protected, though, in the event that it comes to harm.
The cost of rebuilding
The first obvious question that arises is how much you should insure your house for? That’s not the same as the market value of the property. Buildings insurance will cover the cost of rebuilding in the event of a total loss. In respect of damage below that level it should meet the cost of repairs required to bring it back to the condition it was in before. Reinstatement cost is the term insurers use. Market value and reinstatement cost are two very different things. Generally the former bears little or no relation to the latter. Go by the market value and you’ll either be overpaying for your cover or you risk being underinsured, leaving you to fund the gap between what the policy will pay for and the actual cost of repairs or reinstatement.
The Society of Chartered Surveyors Ireland (SCSI) publishes a guide to house rebuilding costs on its website scsi.ie. The site also has a calculator that can be used to estimate this figure for insurance purposes. These are guidelines for the minimum value to which a property should be insured. They give estimates for typical estate-type houses in various parts of the country. By way of illustration a 94 square metre, three bedroom, semi-detached house in Cork City with an asking price of €360,000 would cost €185,196 to rebuild according to the SCSI guidelines.
Those ballpark figures won’t account for extra investment that homeowners may have made such as built-in wardrobes or a high-spec kitchen. If your fixtures and fittings are better than average then your reinstatement cost will be higher than the average figures in the SCSI guide. Equally if you have renovated or extended the property you should update your policy to reflect the rebuilding cost of that porch, conservatory or any other addition you might have made. Some policies require the holder to inform the insurer in advance of making structural changes to the property.
Your table of contents
Making sure you have the appropriate level of cover for contents requires some thankless admin work. Comparison website Compare Insurance Ireland recommends policyholders take a room by room inventory each year of all the items they want included. Check the small print for details such as whether there is an upward limit on claims for valuables. Some policies will pay out no more than a set sum for any individual item, such as an engagement ring. If you have valuables that are worth more than that amount, then you will need to make sure these are included separately (which obviously will affect the premium).
Separate contents insurance is worth considering for renters too. The annual premium for a contents-only policy to a value of €20,000 including separate worldwide cover up to €5,000 for an engagement ring ranges from €115-€150. A small price to pay relative to the financial burden of having to replace possessions following a fire or burglary at a rented house or apartment. It may be helpful to take pictures of the contents you are insuring. Keep receipts for items, where possible - these are records you can use to back up your claim for a replacement item if required. The value you have items insured for should reflect the cost of replacing them. You may have bought your television set a couple of years ago and feel its value now is only €100 but if it would cost €700 to buy a new one in the event it was stolen from your home or destroyed then there’s no point listing the replacement cost as €100.
What your insurer needs to know
To make sure you are, in fact, covered in the event of damage or loss to property or home contents you need to be aware of factors which can invalidate claims. The thing you really need to watch is non-disclosure, even if it’s purely as a result of an accidental oversight on your part. If you have a monitored alarm service, for example, at the time you take out your policy you must inform your insurer in the event you later decide to cancel the service. That may result in a higher excess - the amount of any claim you are required to meet before the insurance kicks in - but that’s clearly a better outcome than having to foot the entire bill yourself.
Jonathan Hehir, managing director of insuremyhouse.ie, points to a number of other factors you need to disclose to your insurer to avoid invalidating your policy. Airbnb use is an increasingly common one. If you let out your property using Airbnb or any other similar service you need to tell your insurer. If you don’t and you later make a claim - even if it is in no way related to your Airbnb hosting activity - the insurance company is entitled to deny the claim based on your non-disclosure. "We really want to inform people and make it abundantly clear that if they rent out their home through Airbnb, then they must notify their insurer. Such activities would be classified as an additional risk by insurers," Hehir said. That also applies to any other use of the family home that may be considered "business activity". If you carry on a business from your home, such as cutting hair or giving beauty treatments, you need a specific policy to cover that. Don’t assume because it’s only on a small scale that it’s not relevant to the insurance policy.
Be aware that your insurer needs to be informed if you have made a previous home insurance claim even it occurred elsewhere. "What we come across quite frequently is that people don’t realise with home insurance they must declare all home insurance claims they have had even if it’s on a different property than the property they are insuring," said Hehir.