Irish homeowners have been warned they may be underinsured due to the rising costs of rebuilding a home.
Building costs have jumped significantly over the last six months with price increases of between 15 per cent and 44 per cent - meaning it will cost more to rebuild your home after a claim.
As many as 40 per cent of property owners have already received a warning letter from their insurer to ensure they have the correct cover in place in the event of an insurance claim.
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However, the response level from home insurance policyholders has been low. Of those who received a warning letter, 20 per cent said they simply cannot afford to pay any more to be insured to the correct rebuilding costs.
This is according to research by iReach Insights on behalf of Aviva Insurance Ireland DAC who conducted a survey of 600 homeowners across the country.
Aviva is urging homeowners to review the rebuilding costs on their home insurance policy as they said they are seeing more evidence that the sums insured are inadequate when dealing with customer claims.
For example, if a home is insured for €300,000 and the current rebuild cost of the property is €400,000 - it is underinsured by €100,000 or 25 per cent.
If a claim occurs where the damage is estimated to be valued at €100,000, because the property is underinsured by 25 per cent, the insured will therefore only receive €75,000. The homeowner will then have to supplement the €25,000 if they wish to restore the property to its original standards.
Billy Shannon from Aviva said: "Rising inflation and increases in material and building costs have seen the Society of Chartered Surveyors Ireland (SCSI) increase the rebuild rates last September, with significant increases of between 15 per cent to 44 per cent set. This is at complete variance to the previous rate increases published by the SCSI where rates would have increased by 4 per cent to 8 per cent.
"Anyone who has ever had to make a claim on their policy will appreciate that it can be a stressful time and, as insurers, we want to avoid having to add to the stress by telling our customers that they are under-insured."
He continued: "From a claims’ perspective, we are seeing evidence of under insurance in c. 16 per cent of claims received to date and we expect that this figure will continue to rise unless action is taken.
"While the increased rates are considerable it does not necessarily mean that premiums will increase by the same amount. We would encourage homeowners to take the time to review their cover and make the necessary adjustment to ensure they are fully covered."
Aviva recommends that home insurance customers use the SCSI’s house rebuild calculator that is available on its website to make sure that they are fully covered.
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