- What does underinsurance mean?
Underinsurance is when a property and/or its contents are insured for less than the amount that it would cost to rebuild, reinstate, or replace them.
- Why are we hearing about underinsurance in the media?
Rising inflation, the war in Ukraine, Brexit and Covid-19 restrictions and other economic factors have impacted the cost of repair/ replacing buildings or contents as there has been a significant increase in the cost of raw materials and products, increased energy prices and a labour shortage.
- Why have I received this communication from RSA/FBD about underinsurance?
RSA and FBD will encourage Bank of Ireland Insurance customers to regularly review your sums insured. It’s important that you regularly review the cost to rebuild your home and/or the cost of replacing your contents.
If the cost has increased you will need to update your home insurance policy to avoid being underinsured.
- What is my buildings rebuild value and how do I calculate?
Your property should be insured for its full rebuild cost. The rebuild cost is the cost of replacing your home and outbuildings. It should include:
- the cost of demolition and
- the cost to remove debris after a loss;
- the cost of professional fees;
- and the costs associated to comply with current building regulations.
The buildings sum insured should include all items mentioned in the “Buildings” definition of the policy. It is important to note that buildings include items such as solar panels, septic tanks, fuel tanks, terraces, patios, decked areas, driveways, footpaths, walls, fences, gates and hedges.
You need to consider other factors that may increase the rebuild cost of your home:
- is your home is a period or listed house.
- are the materials used in the building of your home are of non-standard material.
You may consider getting a professional to calculate the total rebuild cost of your property if this is the case as a professional valuation will make sure that you insure your home for the true rebuild cost.
- Is there an online tool to calculate my rebuild value?
You can check the approximate rebuilding value of your home on the Society of Chartered Surveyors’ House Rebuild Calculator
However, this is a generic calculator and do not account for period homes. For example, if you are unsure about the correct rebuild cost of your property, we recommend that you seek professional advice to help you with this. The professional will make sure your rebuild costs are correct.
- Is the rebuild value the same as the market value?
Remember, the rebuild cost is not the same as the market value of your property. Market value is the price your home could sell for on the market. It reflects not only construction costs, but the cost of the land, the supply and demand for houses, and the location of the property.
Rebuild cost is the cost to replace or reinstate your house to an equivalent standard, using equivalent materials and equipment. It does not include the cost of the site. The rebuild cost is what is important from an insurance perspective.
- What should I insure my contents for?
Your contents sum insured should cover the cost of repairing or replacing personal belongings and household goods in your home. This includes items such as carpets, rugs, furniture and electronics. An easy way to work out the value of your possessions is to go from room to room and add up how much it would cost to replace every item as new. Another tip is to keep receipts for valuable items along with matching photographs.
- What happens if I’m underinsured?
In the event of a valid claim, your home insurance policy will cover costs based on the buildings and contents sums insured that you provided to us when purchasing/ renewing your policy. You may think your home insurance policy covers the full cost to reinstate your property and/or contents to the pre-accident condition. This may not be the case if you are underinsured.
To explain the impact of underinsurance, let’s look at an example of a claim where the property / contents were underinsured.
A customer takes out a policy to insure the buildings of their home for a rebuild sum of €400,000 and contents sum insured of €40,000. Let’s see what would happen of the actual cost to rebuild the home was calculated at €500,000 and the contents value was actually €50,000 to replace.
Sum Insured Actual Cost Difference % Difference House €400,000 €500,000 €100,00 20% Contents €40,000 €50,000 €10,000 20%
Claim 1 – €50,000 loss to the home
- Claim value €50,000
- Less underinsurance (20%) €10,000-
- Sum due to the customer €40,000
In this example, the customer would receive €10,000 less than the cost of their loss.
Claim 2 – Total loss of the home e.g. result of a fire
- Claim value €500,000
- Less underinsurance (20%) €100,000-
- Sum due to the customer €400,000
In this case, the customer would receive a payment that is €100,000 less than the total cost of their loss.
Claim 3 – €10,000 loss of contents
- Claim value €10,000
- Less underinsurance (20%) €2,000-
- Sum due to the customer €8,000
In this case, the customer would receive €2,000 less than the cost of their loss.
- How do I update my sums insured?
Mid Term Alteration
If you increase your sum insured now and your policy is not due for renewal, There will be an associated increased in premium for the additional cover that will calculated, when the change is made, up until your policy renewal date.
In addition, if a change is made or not, RSA at your next renewal, RSA are applying an increase to the buildings sum insured and an increase to the contents sum insured in line with the Society of Chartered Surveyors Ireland guidelines and the Consumer Price Index published by the CSO. The % increases will be noted on your renewal documents when they are issued.
So if you have make any changes to your policy now, RSA will still apply the indexation increase and you will need to review your sums insured shown on the renewal schedule to satisfy yourself that they reflect the true rebuild value of your house and replacement cost of your contents.
How do you make a change?
On the IVR you can get through by selecting option 1 for Home Insurance, then select option 2 for amendments and then option 1 for RSA.
Mid Term Alteration
If you increase your sum insured now and your policy is not due for renewal, FBD will not charge you for any change to the sums insured up to the value of €50.00 (charges will be incurred if the additional premium incurred is above this amount) up until the policy renewal date.
At your next renewal, FBD will then applying an increase to the buildings sum insured and to the contents sum insured, the % increases will be noted on your renewal documents when they are issued.
So if you have make any changes to your policy now, FBD will still apply the indexation increase and you will need to review your sums insured shown on the renewal schedule to satisfy yourself that they reflect the true rebuild value of your house and replacement cost of your contents.
How do you make a change?
Call 01 488 4062 between 9am and 5pm Monday to Friday.
On the IVR you can get through by selecting option 1 for Home Insurance, then select option 2 for amendments and then option 2 for FBD.