A significant number of Irish householders have inadequate insurance cover on their homes because they have failed to keep pace with building cost inflation.

The cost of rebuilding an average house in some areas has doubled in the past five years. Householders relying on the general rise in inflation will find themselves seriously underinsured should they need to claim on their policies. Householders also need to factor in the value of home improvements.

In the event of a claim, underinsuring can lead to a shortfall between what is paid out by the insurance company and the actual costs incurred in rebuilding the home. Even claims for partial loss, such as fire damage to one room, can end up costing an underinsured policyholder thousands of pounds.

The importance of using the correct reinstatement value for house insurance purposes is stressed by the Society of Chartered Surveyors, which publishes its 2001 guide to house rebuilding costs today.

The guide is recommended by insurers and is intended to assist homeowners in calculating the minimum value for which they should insure their properties. The sum insured is based on the reinstatement value.

The market value of the house should not be confused with the reinstatement value. The price achieved for a property if sold on the open market is sometimes believed to be the value for which it should be insured. According to the Society of Chartered Surveyors the property's market value is irrelevant as it bears little relationship to the cost of rebuilding it.

The society stresses that the figures it provides are for average houses and are the minimum people should consider.

For the policyholder, the peril of under-insurance comes in the small print. Many house insurance policies are "subject to average", which means that if the house is underinsured, claim payments will be reduced in proportion to the under-insurance.

Take for example a house with insured for £80,000 (102,000), which has an actual reinstatement cost of £100,000. In the event of damage costing £10,000, the insurance company will only pay out £8,000 on policies with an "average" clause. Such policies were common until the mid-1990s.

The Society of Chartered Surveyors rebuilding costs are calculated on a total loss situation, where a house has been totally destroyed and must be demolished and rebuilt. As well as demolition and reconstruction, the costs also allow for surveyors' and architects' fees and for VAT.

The figures are based on estate-type houses built in the Dublin, Cork and Galway areas since the 1960s. There are different rates for terraced, semi-detached, detached houses and bungalows.

The figures exclude non-standard or one-off houses with special design features. Period houses also fall outside the scope of the table of costs and entail higher rebuilding costs.

The insurance of apartments is covered in the block service charge and the society advises owners to confirm with their management companies or agents that their block has been valued for insurance purposes, and that the insured value is current.

A surveyor is needed to carry out a reinstatement valuation on a non-standard house and, according to Mr Conor Hogan of the Society of Chartered Surveyors, reinstatement costs on such houses can be double or treble those for non-standard houses.

Mr Hogan admitted that some industry players felt the surveyors' figures underestimated actual rebuilding costs. One insurer recently paid out £170 per square foot to rebuild a standard terraced house in Dublin destroyed by fire. This is much higher than the guide price of £122 for such a property.

The society recommends that householders ensure their policies are index-linked but the index that really counts is the building costs index. The Guide to House Rebuilding Insurance is published annually and provides a clear formula for working out the sum insured.

People should also be aware that the Society of Chartered Surveyors' data are updated only once a year, each July. People using the data later in the year to calculate rebuilding costs will need to make allowances for the rise in rebuilding costs since the tables were compiled.

House insurance is divided into buildings and contents insurance. In addition to the main structure, buildings insurance normally extends to cover outbuildings such as garages, greenhouses and garden sheds and also walls, gates, fences, paths, drives and swimming pools. These features are not taken into account in the figures provided by the Society of Chartered Surveyors.

Permanent fixtures such as built-in wardrobes, kitchen fittings and interior decoration are included as part of the building. It's important to revise the sum insured to take account of special fittings and home improvements.

Furniture, furnishings, household goods, kitchen equipment and other appliances are covered by contents insurance. Food and drink are also included along with televisions, videos, computers and audio equipment. Even clothing, personal effects such as jewellery and money can be covered up to stated limits.

Contents insurance is not required by mortgage providers and should be considered separately. Home insurance packages normally quote contents insurance value as a percentage of buildings insurance.

The main providers of house insurance are Hibernian, Royal & Sun Alliance, Allianz and AXA. Monthly premiums for a house with £130,000 reinstatement value and £40,000 contents insurance range from £19 to £41.

As always it is worth shopping around but as there are limits and exceptions in every policy, it's necessary to read the policy to make a fair comparison. Most policies require that you bear the first part of any claim yourself and this amount, usually £50, is known as an excess.

Various factors have a bearing on the cost of the premium, such as the location of the property, claims history and the installation of approved burglar alarms and smoke detectors. Discounts are also available for existing motor policyholder.

The obligation is on the insured to provide the correct information for the insurance contract and some people make the mistake of never reviewing their sum insured.

With the rapid increase in building costs inflation over the past six years, it is necessary to review your policy every year. You can start this process by calling your broker or insurance office.

So what should you do if lightning has already struck? The Irish Insurance Federation advises that if your house has been damaged and temporary repairs are needed to prevent further damage, you should arrange to have them done immediately.

If you need to carry out further repairs, get estimates and send them to your insurer before carrying out the work. The insurer will need to assess the damage and approve the estimates before work gets under way.