According to the Irish Insurance Federation, Ireland has one of the lowest rates of home insurance premiums in Europe. Despite the escalation in house prices, the cost of home insurance has remained relatively static.

The dramatic increase in rebuilding costs has been attributed to the increase in insurance and has implications for premiums. Construction inflation is continuing to rise, with the price of materials and labour costs increasing substantially - the average price is now at £125 per square foot.

Subsequently this claim-cost inflation, averaging about 20 per cent, combined with severe winter weather, has impacted on home insurance premiums.

"It's important that people insure for the replacement value and not the market value as this leads to either under- or over-insurance," says Mike Kemp of the Irish Insurance Federation. The IIF produces an annual Rebuilding pamphlet, which advises clients of the replacement value and appropriate cover.

The cost of insurance is often indexed linked, with different companies developing a number of initiatives to combat under-insurance. In 2000 FBD undertook a policy, which automatically increased clients insured sum by 15 per cent to counteract this inflationary measure. This gave clients both six weeks' free cover and subsequently the option to renew the policy.

"It's vitally important that people insure for the replacement value because if home insurance is inadequate, then the average clause applies and you may be only insured for 50 per cent of any loss incurred," says John Burke, regional sales manager for FBD Insurance.

The recent economic downturn is not expected to have much impact on insurance. Recent statistics from the Irish Permanent ESRI house price index revealed that prices rose by 4.8 per cent during the first half of 2001, compared with 10.5 per cent for the same period last year.

However, insurance experts advise homeowners to keep their house insurance at its present level. "People should certainly not reduce their replacement level just because market value has decreased somewhat," says Burke. "Construction inflation is still ahead and the cost of re-building remains very high."

Allianz Insurance also recommends that people insure for replacement value. However, it says that customers must take care to allow for site clearance costs, professional fees as well as improvements such as garages and patios, when calculating the reinstatement value.

Like FBD, Allianz Insurance practises index linking as a protective device for existing customers.

In general there has been relatively little change in the type of insurance available, with many companies and lending institutions offering variants of the same product. The principal home insurance policy is the standard "building and contents" cover, which can be acquired either separately or together.

FBD Insurance's "Multi Peril" provides indemnity for a range of incidents from traditional fire, theft and storm damage, to unforeseen occurrences such as floods, air disasters and subsidence. Additional cover includes personal accident insurance, all-risk cover or accidental damage cover.

All-risk cover provides indemnity for specific items such as jewellery or sports equipment and is more expensive. Irish Permanent's "Watchdog" offers two choices of insurance - (a) standard cover with accidental damage, and (b) standard cover with accidental damage and all-risks. Both choices are determined by location and cost of insurance.

A house in Dublin with a replacement value of £100,000 will cost £339 with the first type of cover and £451 with the second type. Costs in other parts of the State are £273 and £358 respectively.

Allianz's "building and contents combined" cover offers six percentage options (15, 20, 25, 30, 40 and 50). Apart from the optional all-risks cover, clients can choose from a number of other alternative covers including money caravan/mobile home small craft or home equipment. Allianz has also introduced child-minding cover for two children, and "trace and access" cover, which insures for loss of goods while shopping.

LOCATION is a factor with some insurance firms. Although FBD does not differentiate between urban and rural or postal codes, its content premium is 30 per cent higher in Dublin compared to the remainder of the Republic. "We have brought our urban prices in line with rural premiums," says John Burke, "but we found that they still had to be slightly higher in Dublin, because of the risk factor."

Allianz also distinguishes between locations.

Adequate content insurance is essential, and householders should conduct a proper inventory. It's advisable to get a professional opinion and insurance companies are ready to help.

Indeed, the content rate is very competitive with contents valued in the region of £20,000 costing about £80.

Often severe damage to a dwelling place makes it uninhabitable. In this case, insurance will provide for alternative accommodation up to 15 per cent of the sum insured on buildings.

Naturally, market value has impinged on this specific policy due to the rapid increases in rent, and this is duly acknowledged by the IIF. "Market value is a consideration in the case of alternative accommodation, as house prices have escalated," says Mike Kemp of the IIF.

The advent of new players and the recent mergers is set to transform the insurance business. While some argue that these mergers will result in reduced options for consumers, the market for home insurance remains steadfast, well established and, above all, competitive. This means that house-owners can shop around for the best indemnity policy.