Insuring Your Irish Home: Valuation Factors

When it comes to valuing your house for insurance purposes in Ireland, it's important to remember that you are insuring against the cost to rebuild, not the market value of your home. This means that you need to calculate the cost of reconstructing all buildings, including any outbuildings, and allowing for inflation. The Society of Chartered Surveyors Ireland provides a house rebuilding calculator to help you determine this cost. It's also important to review your policy annually, as rebuild costs can fluctuate and you want to ensure your property is adequately covered.

The rebuild cost of your house is not the same as its market value

When it comes to insuring your house, it's important to understand the difference between the rebuild cost and the market value. While you might assume that the amount of insurance you need is equal to the amount you paid for your house, this isn't always the case.

The market value of a house is the price it would sell for on the real estate market, including the land. This value is influenced by factors such as location, crime rates, the amount of land, proximity to schools, and the availability of similar homes. However, the rebuild cost is the amount it would take to completely rebuild your house in the event of a total loss, such as a fire or storm. This includes the costs of materials, labour, plans, permits, and any additional charges such as planning permission or architects' fees.

In most cases, the rebuild cost of a house is higher than its market value. This is because rebuilding a house often involves additional costs, such as demolition and cleaning up the existing structure, higher costs for smaller quantities of supplies, and labour costs for a single rebuild. These costs can vary over time, so it's important to review your insurance policy annually to ensure that your coverage is still adequate.

In Ireland, while it's not mandatory to purchase home insurance, many homeowners choose to do so for added peace of mind and protection against unforeseen accidents. When purchasing home insurance in Ireland, it's your responsibility to ensure that the insured amount represents the full value of your house, including the rebuilding cost. To calculate the rebuilding cost, you can use tools provided by organisations like The Society of Chartered Surveyors in Ireland, which take into account factors such as the size of your home, the region you live in, and any additional features or fittings.

Use the Society of Chartered Surveyors Ireland's house rebuilding calculator

The Society of Chartered Surveyors Ireland's house rebuilding calculator is a useful tool for calculating the rebuilding cost of your home. This is important as the amount you insure your house for should represent its full value.

The calculator is intended as a guide to give you an indication of the rebuilding cost of your house. To be fully confident that your home is adequately insured, an independent surveyor can calculate the exact rebuilding cost. Rebuild costs should also factor in the costs of professional services, such as solicitors or architects.

The calculator provides average rebuilding rates for speculatively built homes, or estate-type homes. It should not be used for other house styles, such as one-off homes in the countryside or period properties, in which case you should seek professional advice to ensure the correct rebuilding rates are used. The costs are provided by region, and you should determine which region is most appropriate for your location.

The calculator assumes a standard quality specification, including normal foundations, timber frame or brick/block walls, cladding, slate/concrete tiled roof, concrete ground floor and timber first floor, softwood flush doors and double-glazed windows, painted plaster to walls, plastered ceilings, and standard electrics. The sum insured should be increased to allow for better-than-average kitchen fittings, built-in wardrobes, finishes and any other items not normally included in an estate-type house.

House contents such as carpets, curtains, and furniture are not covered by the figures and should be insured separately. No allowance has been made for the cost of outbuildings (e.g. garages or sheds), but these can be added to the calculator with a best-estimate cost. The figures do allow for a concrete path around the house, driveway repairs, re-grassing, and fencing.

The calculator also allows for demolition costs, professional fees incurred in reinstatement, and VAT on building costs and professional fees.

The risks of being under-insured

Home insurance is not mandatory in Ireland, but it is a good idea to have it to protect your home from unforeseen accidents. However, it is important to insure your home for the correct amount, as under-insurance can lead to serious financial difficulties.

Under-insurance occurs when the sum insured on a property is less than the amount it would cost to rebuild or replace the property. In recent years, construction costs have increased significantly due to rising inflation and a shortage of materials and labour, making it more important than ever to ensure adequate insurance cover.

If you are under-insured and need to make a claim, you risk only receiving a portion of the claim amount. Most policies have an 'average' condition, which reduces the claim payment by the percentage you are under-insured. For example, if your home is insured for €300,000 but the full cost to rebuild it is €400,000, you are under-insured by 25%. If damage occurs and the cost to repair it is €100,000, a deduction of 25% (€25,000) will be made, leaving you with only €75,000 to cover the repairs.

In some cases, under-insurance can lead to even more severe consequences. If you are significantly under-insured, you may have to pay for a large portion of the rebuilding or replacement costs out of your own pocket, potentially landing you in financial difficulty. You could even end up bankrupt with a mortgage still outstanding.

To avoid the risks of under-insurance, it is essential to review your insurance policy regularly and adjust the sums insured to reflect any increases in rebuilding costs. This includes taking into account any renovations or extensions you have made to your home, as well as the cost of associated fees such as architect fees and regulation fees. By staying on top of your insurance coverage, you can ensure that you are adequately protected in the event of a claim.

How to avoid over or under-insuring your home

Home insurance is a way to protect your home, which is likely to be one of the most valuable investments you'll ever make. It's important to get the right level of cover, as over-insuring or under-insuring your home can be costly. Here are some tips to help you avoid these pitfalls:

Understand the Difference Between Rebuild Cost and Market Value

One of the most common misconceptions about home insurance is that it's valued against the market price of your property. The market value is usually much higher than the actual cost to rebuild the structure and any outbuildings. Your policy should cover the rebuild cost, not the market value, so calculating your insurance based on market value will likely lead to over-insurance.

Use a Rebuilding Cost Calculator

The rebuilding cost of your property is what you should use when seeking home insurance quotations. The Society of Chartered Surveyors Ireland (SCSI) provides a simple house rebuilding calculator to help you determine this cost. This tool takes into account factors such as the size and type of your house, as well as any additional features like garages or high-end kitchens. It's important to note that the SCSI calculator is for estate-type houses, and unique or period properties may require professional advice to ensure accurate rebuilding rates.

Consider Inflation and Fluctuations

When calculating the rebuild cost, it's important to allow for some inflation. Rebuild costs can fluctuate, and failing to account for this can lead to your property being under-insured. A 2022 report by SCSI showed that rebuild costs in Ireland increased by a national average of 21% over a 12-month period.

Regularly Review Your Policy

Don't just set and forget your insurance cover. It's important to review your home insurance annually to ensure that your policy remains adequate for your property. Any structural renovations, major alterations, or home improvement projects can impact the rebuild cost and, therefore, your policy. Consult your insurer before undertaking any significant changes to your home.

Understand the Risks of Under-Insurance

If you are under-insured and need to make a claim, you risk receiving only a portion of your expected payout. Most policies have an 'average' condition, which means that if you are under-insured, your claim payment will be reduced by the percentage you are under-insured. For example, if your home is insured for €300,000 but the full cost to rebuild is €400,000, you are under-insured by 25%. If damage occurs and the repair cost is €100,000, a deduction of 25% (€25,000) will be made, leaving you with a maximum payout of €75,000.

Contents cover insures the cost of replacing your belongings

When it comes to calculating the value of your belongings, it's important to consider what it would cost to replace them at today's prices. Include as many details as possible, such as serial numbers, receipts, warranties, photos, condition, and the date of purchase. This will help you identify what items are worth insuring and ensure you have sufficient coverage.

It's worth noting that most contents insurance policies offer the replacement value of your belongings, sometimes called 'new for old' cover. This means you will be covered for the full cost of replacing your belongings with new ones, which often costs more than their current value. While replacement value gives you the best cover, it also tends to be more expensive.

Some policies only offer the value of your belongings at the time they are insured. For example, if your fridge is currently valued at $500, the insurer will give you $500. This amount may not be sufficient to purchase a new fridge of similar quality, as the value of the fridge may depreciate over time.

When you make a claim, insurers may repair or replace the damaged items or pay you the amount it would cost to repair or replace them. It's important to review your policy annually or after significant changes to your home or its contents to ensure you have adequate coverage.

Additionally, consider accidental damage cover, as most contents insurance policies do not include this. This can be beneficial if you want protection against mishaps, such as staining your couch or breaking a vase. Check the exclusions and limits of your policy, as certain items like portable electronics and valuable jewellery may have specific coverage limits.

Finally, take advantage of discounts and benefits. You may be able to lower your premium by bundling your contents insurance with your home insurance, paying annually, or applying online. Installing security features like deadlocks, fire extinguishers, smoke alarms, or a security system may also make you eligible for discounts.

Frequently asked questions