Bank gives homeowners a free insurance cover uplift

Bank of Ireland is giving its home insurance customers a free uplift until their next renewal date, in the hope of getting them to insure their homes properly. The increased cover will ensure that the buildings and contents cover on customers' homes meets minimum recommended levels.

Around 30 per cent of Bank of Ireland's customers will benefit from the uplift, based on industry patterns that suggest up to six in 10 home-owners are underinsured.

Some Bank of Ireland customers are underinsuring their homes by as much as 35 per cent, according to Mr Conor Patton, marketing manager for Bank of Ireland Insurance Services.

"This is clearly a risky situation for those home-owners," he said.

Bank of Ireland is writing to customers to advise them of the potential shortfall in their home cover. The bank is asking customers to reflect on their existing cover by completing an up-to-date assessment of the value of their house and contents.

According to Bank of Ireland, the minimum recommended cover for buildings is €135,000 in Dublin and €105,000 in other areas.

However, Mr Patton said that some customers would find that they needed more cover than this to be fully protected in the event of fire, flood or other damage to the home. The bank has produced a guide to calculating home insurance, entitled We've extended your cover, but is it enough?

The latest edition of the Society of Chartered Surveyors' guide to house rebuilding costs estimates that estate-type, three-bedroom semi-detached houses cost €160,000 to rebuild if in Dublin, €128,000 in the Cork area and €117,000 in Galway.

The sum insured should be increased to allow for better-than-average kitchen fittings, built-in wardrobes and finishes such as wooden floors.

Cover for furniture, carpets, curtains and other contents should be at least €20,000 in Dublin and €15,000 in all other areas, Bank of Ireland is advising its customers.

The rationale behind the scheme is that customers will effectively have to cut the value of their buildings and contents cover at their next renewal if they want their premiums to stay the same.

A greater proportion of customers will be likely to maintain their cover at the level provided for free until their next renewal date and agree to pay higher premiums.

However, home insurance premiums are already on the rise, even before consumers consider bumping up the value of the cover.

Premiums have increased by about 40 per cent over the past couple of years, due to rising rebuilding costs, a higher frequency of flooding and storms, and the fact that homeowners are opting for higher-quality fittings.

At Bank of Ireland, premiums on policies with buildings cover of €135,000 costs €243 a year in most parts of Dublin. Premiums around the country will depend on location but a home in the midlands insured for the recommended minimum level of €105,00 will cost €200 a year.

Homeowners who live in flood plains are likely to face much higher insurance costs and the industry has already threatened to withdraw cover from certain areas if the likelihood of flooding turns from a risk to an inevitability.

In the event of a claim, under-insuring can lead to a large gap between what is paid out by the insurance company and the actual costs of rebuilding the home.

Some companies include what is known as the "average clause" under their home insurance policies. This means that homeowners often end up having to pay a proportion of the reinstatement costs in the event of partial damage.