We tend to be quite fond of all the bits and bobs of stuff we’ve collected over the years and the place in which we house them. The collection of commemorative Princess Diana plates and the customised built-in storage we had built for them. The custom utility room with a workhorse washing machine that takes on the entire muddy kit for under-12′s football in one wash. A hallway with artwork, a bedroom with an orthopaedic mattress and a jewellery box with grandma’s rings. A carefully organised garage with a curated collection of power tools that you’ve grown emotionally attached to over the years.
We baulk at the thought of losing anything we have worked hard for or care about due to upsetting and unforeseen circumstances. Things like fires, floods or robberies that can leave us not just with the heartache of our precious stuff gone but the financial headache of replacing it.
Some treasures with sentimental value can never be replaced, like your children’s first baby shoes or a Galway jersey Micheal Donnellan signed in 1998 that you’ve refused to let anyone wash since because it has his sweat on it.
Whatever your prized possession is, there is something to be said for making sure you can recoup some of your losses and start again if the worst were to happen to your home and contents.
This is where home insurance comes into play. Like seemingly everything else these days, the price of premiums has gone up by double digits.
“Consumers are seeing increases of over 20 per cent,” said Demot Wells, head of general and health insurance at Cornmarket.
Which means people are starting to seek out the best-value coverage.
“The industry has seen a huge increase in consumers shopping around as a result of significant price increases,” said Wells.
So what are things to be on the lookout for when trying to nab the best deal on home insurance?
Be wary of underinsurance
‘The biggest risk for consumers at present is underinsurance,” stressed Wells.
Last year, the Central Bank rang an alarm about underinsurance in the market after finding it had more than doubled from 6.5 per cent in 2017 up to 16.5 per cent in 2022. This meant a rising number of consumers were being left vulnerable with policies and payouts not keeping pace with the increase of building costs and materials. For example a previous policy that might have covered a family to rebuild their home if it burned down might now not be enough and they could be left holding the bill.
And that shortfall could be hefty, according to figures from the Society of Chartered Surveyors in Ireland.
The base rebuild cost for a 95sq m three bed semidetached house in Dublin, Cork and Waterford rose by €10,000, €10,000 and €12,000 respectively in 2019, 2020 and 2021, SCSI research found.
To paint a picture of just how high and quick costs jumped, from 2021 to 2022, prices saw a €43,610 increase for a similar 98sq m rebuild in Dublin, €48,584 in Cork and a whopping €56,524 in Waterford.
The Central Bank put the word out to insurers last year to notify all policyholders about underinsurance risks, stating “more could be done by firms to highlight the practical consequences of underinsuring their home”.
In April The Irish Times reported one in six claims made to a leading provider weren’t paid out in full due to policyholders renewing their premiums without taking into account the building price hikes according to research from Aviva. However, the same research found fewer than one in 10 of those people warned that they might not have sufficient coverage had taken any action,
“It is estimated that potentially one-third of homeowners incorrectly insure their property as they base their insurance on the market value of the property and not the rebuilding costs,” said Wells.
“All buildings should be insured for their full replacement value, including the cost of demolition and debris removal.”
If a property is underinsured, Wells said “the value of any claim is reduced by whatever proportion is represented by the level of underinsurance”.
“For example, if your home was completely destroyed in a storm and was insured for €300,000 but the full rebuild cost is actually €400,000, then you would be underinsured by 100k or 25 per cent.
“In the event of a claim, the most the insurer would pay is €300,000, meaning the policyholder will have to pay the other €100,000 – subject to terms, conditions and exceptions of the policy.”
This could be a “huge financial strain on the owner at a very difficult time”.
Consumers can use the free, online SCSI House Rebuild Calculator to get a base idea of their potential current rebuild costs to see if they are covered by their policy – however there are limitations on the type of homes the listed per square metre rates apply to.
Worried about being underinsured? These are the ways you can avoid it, says Wells.
Aside from checking that “coverage aligns with your home’s actual replacement cost, including any renovations or improvements”, he advises policyholders update their coverage to “account for inflation and changes in your home’s value”.
And keep an eye out for inflation protection also known as indexation or index linking in a policy.
“It helps policyholders stay up to date with inflation by automatically increasing their sums insured each year in line with different building cost indexes, such as the DCE building cost index.”
Aside from underinsurance, consumers need to be careful their policy matches their unique needs – does it cover building insurance and content insurance? Is there a rare watch collection included or does that require a separate policy? What about if someone nicks your bike from the shed but the shed is technically a communal shed on a shared bit of land? Read the fine print to find out.
Insurers and consumers reassessing policies after the Central Bank’s underinsurance warnings and the skyrocketing building costs played a part in home insurance seeing a 22 per cent price increase this year.
It sounds like a really boring version of the film Inception but did you know insurance companies purchase insurance on themselves? It’s called “reinsurance” and it’s so the insurer can “protect itself from the risk of loss” but it’s us who could end up paying for it, explained Wells.
“Reinsurance costs continue to rise and insurers tend to pass some or most of this cost on,” he said.
Rising building costs have a knock-on effect on the price of premiums as potential payout amounts have to keep pace. Other things that raise premium prices include previous claims on your policy and insurers updating their “statistical models used to assess and rate risk”.
The good news is that some factors, within the control of some consumers, can lower premiums.
According to Wells, “discounts are available for installing security systems, specific types of locks on doors and windows, smoke alarms and other safety features” as well as considering bundling policies with the same insurer as they “offer discounts for having more than one policy with them”.
Paying your insurance annually might also see you paying less by avoiding monthly direct debit charges. Also, try adding or increasing voluntary excess at your own risk. Going a full year without claiming means your insurer could “reward you with a discount on next year’s premium”. With the annual discount getting bigger with “each claims-free year after that”.
While no-claims discounts might make it seem like sticking with your current insurer is worth it, Wells says it’s still “good practice to shop around and compare quotes from different insurers during the renewal period to ensure you’re getting the best value”.
The decision to stay or leave will depend on the individual’s circumstances such as “loyalty discounts, competitiveness of your provider’s rates, whether you have had a claim etc.”
If you’re already insured, then Wells advises your first step should be to get on to your current insurer and broker and ask them for the best price.
Then it’s time to “make sure you get all the discounts you are entitled to”, including loyalty and multiple policy ones.
Once you have that or if you’re a first-timer, next compare quotes from multiple insurers but don’t leave it to the last minute
“Take the time in advance of renewal to shop around various insurers and brokers to satisfy yourself you are getting the best price.”