It could be a costly oversight.
Cork homeowners have been warned to mind the ‘insurance gap’ as rebuild costs have shot up by well above 6% in three years.
Many households could discover gaps in their insurance of anywhere from €4,000 to €35,000 and above, leaving them hugely exposed in the event of a claim. Undervaluations of up to 18% have been reported among home insurance customers nationwide.
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.
‘It’s an easy mistake to make’
Paul Walsh, CEO of insurance provider Peopl.ie says the gap in cover is definitely going to impact hundreds, if not thousands, of Cork homeowners.
“When we looked at our own national database and compared the ‘sum insured’ on say a two-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.
“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.”
“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 difference in the cost of premiums, but if something happens it will save you a lot of money.” Mr. Walsh concluded.