Home insurance isn't set in stone

With rebuilding costs still low, it pays to make sure your house isn’t over-insured

ARE YOU PAYING too much to insure your house? The chances are that you are, particularly if you haven’t reviewed your policy in years and have steadfastly stayed with the same company – either out of a misguided sense of loyalty or out of sheer laziness.

While the cost of rebuilding a house increased by 1.5 per cent in the last 12 months according to recent figures published by the Society of Chartered Surveyors Ireland (SCSI) – the first increase since the property boom came to a shuddering halt in 2008 – costs are still nearly 25 per cent lower than they were when the bubble was at its most bubbly.

This marginal increase means that the cost of rebuilding a typical three-bedroom semi in Dublin has increased by €9 per square metre, or from €167,105 last year to €167,960 this year – an increase of approximately 0.52 per cent.

In Galway, the cost of a similar rebuild has increased by €22 per square metre, or from €125,115 last year to €127,205 this year – an increase of approximately 1.67 per cent. In Waterford the increase was almost 2 per cent.

Unsurprisingly, Dublin has the most expensive rebuild costs across all house types. In the capital, the cost of rebuilding a four-bedroom detached house has increased by €11 per square metre to €209,804, while a two-bedroom terraced house has seen such costs climb by 0.5 per cent to €128,030.

Andrew Nugent of the SCSI says the latest increases are not due to builders charging more for their work – they are down to changes in building regulations. It costs more to provide the improved insulation now required for walls and floors, and to ensure air tightness. There are also increases across the board in materials, VAT on professional fees and other input costs into the construction process, including oil.

“The falls in recent years generally spelled good news for homeowners, in that they could expect a pro-rata reduction in their house insurance premiums,” he says. “However, it now appears we have come to the end of that trend and some owners may face very modest increases.”

Prices may have risen over the last 12 months, but they are still down 24 per cent from 2008. That year the cost of rebuilding a three-bedroom semi in Dublin cost €208,810, €33,000 more than today, while the price in Galway was €151,905 – nearly €27,000 more than now.

If you haven’t made any modifications since the boom times, your premiums should also have fallen. But they do not fall automatically and people have to actively go looking for the savings.

While the house insurance industry is very quick to moan about increased costs and the impact that serious floods and freezes are having on policy prices, it is very quiet when it comes to things which have a downward effect on premiums.

Back when the cost of rebuilding was on a perpetually upward curve, insurance companies used to index-link the amount insured so that policies automatically increased in line with inflation each year. They did this to ensure that people were not under-insured.

However, when inflation turned to deflation and rebuilding costs plummeted, the same companies were not so helpful – few if any started automatically reducing the building sum insured as the costs associated with rebuilding fell.