Properly insuring your home is crucial to protect what’s likely your biggest investment. However many Irish Insurance providers may be underinsured or undercharging because they don’t have an accurate rebuild valuation. Recent research highlights this growing issue across the country.
According to the Central Bank of Ireland’s review, under-insurance in the home insurance market has been steadily increasing over the past few years. In 2017, an average of 6.5% of paid home insurance claims were under-insured. Alarmingly, this rose to 16.5% of paid claims being under-insured by 2021. For those whose claims were reduced due to under-insurance that year, the average reduction in claim payment was approximately 19%.
Insurance providers have also flagged the prevalence of undervaluation among homeowners. Zurich found that only 51% of people are correctly insuring their homes, meaning hundreds of thousands of households are likely under-insured. Similarly, Aviva’s research revealed 65% of customers reported a lack of confidence in their insurance cover, and only 6% of customers alerted about potential under-insurance took action to address it.
The Central Bank’s review emphasises the need for insurance firms to better communicate the risk of under-insurance to customers and provide clear information on estimating adequate sums insured to avoid potential shortfalls in claim payments.
What is the Rebuild Cost of a Property?
The rebuild cost, also called reinstatement cost, is the estimated amount it would cost to completely reconstruct your home from the ground up if it was destroyed beyond repair by an insurable event like a fire. This cost covers:
- Demolition and site clearance
- Architectural and professional fees
- Labor and materials to rebuild
- VAT and other taxes
- Meeting current building regulations
The rebuild cost focuses solely on the physical reconstruction – it does not account for the land value or location. This makes the rebuild valuation different from the market value, which is what your home could sell for.
Calculating an Accurate Rebuild Cost
There are a few methods Irish homeowners can use to calculate their property’s estimated rebuild cost for insurance purposes:
Online Calculators The Society of Chartered Surveyors Ireland (SCSI) provides a free online rebuild cost calculator that uses average rates based on your home type, size, any garages, construction quality, and region. This can give a rough baseline estimate.
Alternatively, the Association of British Insurers also has a basic rebuild calculator, though the rates are based on UK figures.
These online tools provide a quick, general calculation. However, they do not assess the specific details and nuances of your individual property.
Hire a Chartered Surveyor
For an accurate, professional rebuild valuation, you should hire a chartered surveyor to inspect and assess your specific property. This route is highly recommended for homes that are:
- Non-standard construction (not brick/blockwork)
- Architecturally unique or period properties
- Listed or heritage buildings
- Recently renovated or extended
- Mixed used (commercial and residential)
A chartered surveyor can provide a comprehensive report calculating the precise rebuild costs for your home’s construction materials, size, features, quality, and required professional fees.
The SCSI has a directory allowing you to find chartered surveyors providing reinstatement cost assessments in your local area.
What If My Home Is Underinsured?
If your rebuild valuation is too low and you are underinsured, your insurance provider will only pay out a portion of the actual rebuild costs after a claim. This can leave you massively out-of-pocket to cover the shortfall, potentially running into hundreds of thousands of euro.
For example, if your home’s accurate rebuild cost is €500,000 but you only have €300,000 of coverage, the insurer may only pay out 60% of the real costs to reconstruct your property. You would then need to fund the remaining €200,000 yourself.
This is why it’s absolutely critical to insure your home based on an up-to-date, adequate rebuild valuation – not just the market value. Underinsurance can result in devastating financial consequences, reflected in the Central Bank’s findings of average 19% claim reductions for underinsured properties in 2021.
Rebuild Cost vs Market Value
As mentioned, the rebuild cost specifically covers the reconstruction of the physical property itself. This differs from the market value, which is the amount your entire property and land could sell for on the open market.
For standard, brick-built homes, the market value is usually higher than the rebuild cost, as it factors in the desirability and land value of the location.
However, for some exceptional properties, the rebuild cost can potentially exceed the market value. This may occur for:
- Architecturally-unique luxury homes
- Heritage-listed buildings requiring special materials/methods
- Homes constructed with expensive, niche materials
- Remote locations with high labour/transport costs
In these cases, insuring based on the lower market value would lead to underinsurance, so the rebuild cost becomes more important.
Why Get an Accurate Rebuild Valuation?
There are two main reasons why Irish homeowners should take the time to get an accurate, up-to-date rebuild valuation:
Avoid underinsurance
As the Central Bank data shows, underinsurance is a widespread issue that can have devastating financial impacts after an insurable event. With a proper rebuild valuation, you can ensure your home is fully covered to restore it to its original state.
Prevent overpaying
On the flip side, overestimating your home’s rebuild costs means you’ll be paying higher premiums than necessary. An accurate, professional assessment ensures you have the right level of coverage without overinsuring.
What Factors Impact Rebuild Costs?
The rebuild cost of a home depends on a variety of factors, many of which can be easily overlooked or change over time. These factors include:
- Age of the property
- Size (square meters)
- Construction methods and materials
- Architectural style and features
- Number of outbuildings (garages, sheds, etc.)
- Premiums for remote/rural locations
- Cost fluctuations for labor and materials
- Any recent renovations or extensions
- Special requirements for listed buildings
Chartered surveyors are experts at evaluating and calculating all these variables into an accurate, comprehensive rebuild valuation tailored to your specific property.
Using an Online Rebuild Cost Calculator
While a professional survey is ideal, homeowners can still get a rough, baseline estimate using one of the free online rebuild calculators mentioned earlier.
The SCSI’s calculator asks for details like your home type (terrace, semi-detached, detached, etc.), total floor area in square meters, region, separate garage status, and whether you have any high-end finishes or outbuildings.
Based on your inputs, it will generate an approximate rebuild rate per square meter to get a total estimate. However, this figure should be taken as just a starting point, not a definitive valuation, especially given the under-insurance issues highlighted by the Central Bank.
For a quicker but less precise option, the Association of British Insurers calculator is even more basic, simply asking about your home’s rebuild year and number of bedrooms.
These tools can at least give you a general sense that your current rebuild coverage is wildly inaccurate and worth getting a professional assessment. Just don’t rely on them as a precise figure.
Reviewing and Updating Your Rebuild Valuation
Your home’s rebuild cost is not a static, one-and-done figure. It’s important to periodically review and update your valuation, as rebuild rates and material costs fluctuate over time.
Most insurance providers recommend reassessing your rebuild valuation at each annual renewal period, in case rates have changed substantially. This allows you to adjust for any potential under- or over-insured amount before it becomes an issue.
Additionally, you should update your rebuild costs after any major renovations, extensions, or other work that impacts your home’s size, structure or materials. Failing to adjust can reintroduce the risk of underinsurance.
An Accurate Valuation Protects Your Investment
As a homeowner, one of your biggest priorities should be ensuring you have adequate insurance coverage through an accurate, up-to-date rebuild valuation. Taking the time to get this figure right protects your largest investment while preventing overpaying on premiums.
Homeowners with standard, brick-built properties can use online calculators to get a baseline. But for peace of mind and a comprehensive assessment, it’s wise to consult a chartered surveyor experienced in reinstatement cost valuations – especially for unique or non-standard homes. This extra step ensures you have the proper coverage without any risks or surprises down the line.
With the increasing prevalence of underinsurance across Ireland, having the right rebuild valuation is more critical than ever to avoid falling into the statistic of denied or reduced claims. An accurate figure is your safeguard against unexpected costs and financial hardship after an insurable incident.