Your property questions answered
Why so little talk about mortgage protection insurance?
Q My husband and I have a substantial, two-salary and relatively new mortgage (we are three years into a 30-year mortgage) and we are thinking about taking out extra insurance in case one of us loses our job. Despite all the talk about redundancy there doesn’t seem to be much talk about this type of insurance although I know it is popular in the UK.
A All insurance policies carry caveats and mortgage protection insurance appears to have more than most. It sounds ideal, doesn’t it? You lose your job and the insurance pays your mortgage, but read the small print carefully. It only pays out due to compulsory redundancy, illness or disability and, if you have any foreknowledge of redundancy, you might have trouble claiming. So if, for example, there have been meetings where possible redundancies were discussed, or you have received memos about the dire position of the company, or even if there’s been a newspaper interview with your CEO where they mention the possibility of redundancies in your firm, then you may have difficulty claiming.
Many policies only cover 12 months worth of mortgage repayments, won’t pay out in the first three months after you have taken out the policy or even the first month’s mortgage repayment. How would the monthly cost – which can be high – stack up against the benefits? You might be better off reviewing your spending habits and increasing your savings so that you have a decent cushion should one of you lose your job. The Financial Regulator has a good guide to this type of insurance at www.itsyourmoney.ie.
How much would it cost to rebuild?
Q In the event of my two-bedroom semi-detached 70sq m (756sq ft) bungalow being burned down, what would it cost me per sq ft to have it rebuilt.
A Homeowners sometimes confuse the market value of their property with what it should be insured for. Just because a house might sell for €500,000 doesn’t mean that it should be insured for that amount. The Society of Chartered Surveyors advise annually on the insurance value of property to give people an idea of the level of insurance they should opt for. We put your question to construction consultants, the Bruce Shaw Group and based on an indicative cost of approximately €210 per sq ft it advises that you insure your 756sq ft home for €159,000 which should cover house reinstatement costs if it burned to the ground.
This includes demolition of the damaged house, rebuilding costs, professional fees, and VAT. That is a general guideline based on the size of your house and is a minimum level. If, for example, yours was a little Georgian gem, it would be more expensive to rebuild than a standard modern semi and you would have to adjust your figures accordingly. Be careful not to insure yourself for much more than the reinstatement value because the premium will be higher and the insurer will only pay out what the reinstatement actually is.
Your questions
Send your queries to Property questions, The Irish Times, The Irish Times Building, 24-28 Tara Street, Dublin 2 or email propertyquestions@irish-times.ie. This column is a readers’ service and is not intended to replace professional advice.
