Enda, a reader, discovered during the summer that his house was underinsured, only after suffering a devastating bathroom flood. His insurance company had displayed prompt efficiency after the flood, ensuring emergency plumbing services and arranging a video call with their loss adjuster, subsequently followed by a visit from a building contractor. This commendable response initially reassured Enda that he had made the right decision by consistently paying them his monthly premiums over a significant number of years.
However, the €16,768 repair bill left Enda troubled. Even though he was assured by his €200,000 insurance coverage secured by continuous premium payments for almost ten years, he was in for a rude awakening. Enda was informed by the loss adjuster that his house was underinsured and should instead be insured for €305k. This unforeseen revelation left Enda in atailspin because he always believed that his home was insured for €200,000 and that he’d receive this cover in the event of an unfortunate incident.
Regrettably, this was not the case as insurance practices in Ireland work differently. This misunderstanding now sees Enda’s insurance provider prepared to reduce their pay-out by nearly €6,000, a fact that has understandably left Enda stunned and frustrated.
A man has aired his grievances after facing difficulties with his house insurance claim. He’s been paying a premium of €200k, but his claim is less than a tenth of that amount. He questions the fairness of the situation, musing whether over insuring to €400k would result in a larger payout. His attempts to claim more than €16,000 were rejected, with the insurance firm refusing to change their decision.
Problematically, his request for an escalation has been complicated by his decision to accept the €10k settlement, which was done out of necessity, having been left without a functional main bathroom for almost two months. He remains determined to pursue the matter, despite feeling exploited by the insurer having paid his regular premium, only to have a compensation much lower than the claimed damages.
He mentioned that his relatives and friends were shocked upon learning about his situation and the underinsurance rule applied during a claim. Many among them have since increased their coverage, inadvertently growing the insurance firms’ revenue.
As per the “average clause”, it appears this practice isn’t uncommon in the Irish home insurance landscape. Rising rebuilding costs in recent years have led many homes to be underinsured, potentially up to 20% of them. According to the Society of Chartered Surveyors of Ireland, these costs saw a 12% surge over a 12-month span, as stated in their report released last October.
It’s only the tip of the iceberg really. The organisation calculated that the minimum fundamental cost of reconstructing a three-bedroom semi-detached home in Dublin was €303,212 a year ago, whereas the same task in the northwest would be around €225,204 cheaper by €78,000.
In the study done in 2016, the SCSI listed the reconstruction costs of an average three-bedroom semi-detached property at €181,071 in Dublin and €117,645 in the northwest.
As a result, if you’re still paying the same insurance on your Dublin property as you were in 2016, you might be underinsured by more than €120,000.
Central Bank figures indicate that people who had their claim reduced in 2021 due to underinsurance saw an average claim payment reduction of about 19 per cent; a predicament that has likely worsened.
The regulatory body did make an effort to contact all household insurance companies in the country, urging them to inform their clients about the potential issue of underinsurance. It is presumed that Enda’s insurer complied.
However, the importance of this correspondence may have been overlooked or unread. Nonetheless, the harsh reality remains that underinsurance can have severe consequences, even if the claim made doesn’t cover the full amount.
For example, if your home’s insurance coverage amounts to €200,000 for reconstruction, but the actual price is closer to €400,000, your home is only half insured. Therefore, if you make a claim for a €50,000 repair, the average clause is applied and you’ll only receive €25,000. This would lead to a shortfall of €25,000.
If you feel like you may also be underinsured after reading this, the SCSI’s house rebuild calculator can offer a range of typical reconstruction expenses for different property types.
If you spot a significant mismatch, we urge you to reach out to your insurance company as soon as possible. Though it means parting with more of your money, it is crucial you have the correct coverage to prevent heavy penalties if something goes wrong.