The increasingly common problem of home under-insurance is the subject of a new facility being launched by Hibernian Group, one of the major house insurers, and of the latest, updated Guide to House Rebuilding Costs from the Society of Chartered Surveyors.
For no extra charge, Hibernian will increase a customer's existing home insurance policy by 25 per cent until the next renewal date in an effort to combat the serious under-insurance of buildings that has come about mainly as a result of the current property boom. A report the company recently commissioned from the construction value managers, Patterson Dempster and Shorthall on house reinstatement costs, found that the current system which sets rebuilding increases based on the Consumer Price Index (CPI) and House Building Cost Index (HBCI) does not adequately reflect the true cost of rebuilding in today's market.
The company cites the example of a house built and insured in 1994 for £45,000. If, in subsequent years, the owner increased his insurance in line with the CPI, the policy would only increase to £50,000, while the current construction costs to rebuild the house would actually be £70,000, a shortfall of £20,000. If he increased his insurance based on the HBCI, the total value would be £52,000, a shortfall of £18,000. Houses that are under-insured are at risk of an "averaging" clause being invoked and only a proportion of the claim being paid because the property was not fully insured.
Hibernian advises that home owners review their house insurance policies annually, based on current rebuilding costs. All new and existing customers will receive the automatic 25 per cent increase in cover after which a discount rate will apply at renewal for the next two years, to smooth over the increase.
Meanwhile, the house rebuilding guide from the Society of Chartered Surveyors provides a very useful table which shows the re-building cost of a typical two/three bedroom semi-detached and detached property built in the 1960s. These costs are calculated on a square-foot/square-metre basis and in Dublin range from £74.50 a square foot for a typical, 750 sq-ft two bedroom terrace house (£70 for three bedrooms) to £67.25 a sq ft for a detached, four-bedroom bungalow. In Cork and Galway, rebuilding costs are fractionally lower - between £61 per sq ft to nearly £69 a sq ft. depending on the type of building. Cork costs are slightly more expensive than Galway.
These prices are up 13 per cent on last year's rates, says the society. Older houses and those with unusual features will cost more to build, mainly because of the higher associated labour and materials charges.
Finally, one new house insurer on the market, Chubb Insurance, offers a personalised valuation service for higher-value properties (£200,000 plus) whereby its own assessor comes and values the buildings and all the contents. Because the underwriting is done at the outset, there are no "averaging" clauses in the contract and there is no paperwork required in the event of a claim.
Copies of the Homeowners Guide to House Rebuilding Costs are available by sending a stamped address envelope to The Society of Chartered Surveyors, 5 Wilton Place, Dublin 2.
