HOMEOWNERS expose themselves to enormous risks should they have to make claims on their insurance.
Research by People.ie Insurance found insurance gaps of up to €35,000 for a typical household.
Homeowners underestimate their coverage by an average of about 18 percent, said People.ie, which offers its products through credit unions.
The home and life insurance provider compared the sums insured for its customers’ properties to the average conversion costs calculated by the Society of Chartered Surveyors Ireland (SCSI) for similar properties.
Turns out people are unknowingly “low balling,” which must be their home coverage.
People.ie CEO Paul Walsh warned that the coverage gap will affect hundreds, if not thousands, of homeowners.
He also highlighted a widespread adoption among homeowners that could end up costing them thousands.
“When we looked at our own database and compared the ‘amount insured’ of a two bedroom house in Dublin to the cost of rebuilding the same property, we found that policyholders had massively underinsured their homes – by as much as €35,000.”
The insurer ran similar comparisons for three- and four-bed homes and found large coverage gaps in the three-bed homes and smaller gaps in the four-bed homes.
Mr Walsh said: “This is a slight error. We can see how people could end up with a lower sum insured than they need.”
He said homeowners may not have checked their property for a number of years, or they may have simply used the SCSI average when purchasing their property and not updated their policy to reflect changes in building and construction costs in the intervening years.
“Because it’s the remodeling costs that determine the amount insured on your home, it’s important that you keep your policy up to date with the current remodeling costs.”
Mr Walsh said there was a general and widespread assumption that if the policy sum insured was, for example, €300,000, the policyholder would receive it from your insurer if the cost of damage to property reached that amount.
“However, this is not the case. Claims are awarded pro rata, meaning if you knowingly or unknowingly undervalued your home, your home insurance will only pay out the amount you valued your property for.”
This means if a home is insured for $300,000 but its actual cost to rebuild is $400,000, then it is undervalued by 25 percent.
The insurer only pays out a maximum of 75% of the €300,000.
Another common mistake homeowners make, highlighted by Peopl.ie, is not reflecting the value of extensions or renovations in their property’s sum insured.
He said that when people have significant work done on your home, such as B. an extension or a loft conversion, this should be taken into account when calculating your home contents insurance.
“The premium costs don’t differ much, but if something happens, you save a lot of money.”
https://www.independent.ie/business/personal-finance/insurance/warning-as-homeowners-underinsuring-properties-by-up-to-35000-41588657.html Warning as a homeowner underinsuring properties by up to €35,000