A rise in building material prices has resulted in soaring home rebuild costs. This has left many homeowners underinsured and financially vulnerable, according to a new Allianz Insurance’s latest study.
A staggering 56% of Irish homeowners have not checked the rebuild cost of their homes in the last year, potentially putting them at risk of being underinsured on their property.
That's according to the Home Rebuild Research Study that was announced in June by leading home insurance provider, Allianz Insurance.
Under insurance is when the amount a homeowner has their home insured for (the 'sum insured' on an insurance policy) doesn't match the actual cost of repairing or rebuilding the property at today’s prices.
As well as highlighting the risk of underinsurance due to the rising cost of building materials, the study also reveals just how few Irish homeowners know about how their properties are insured.
We take a look at the results of the study below.
Home Rebuild Research Study
Findings from Allianz’s new study show that over half (56%) of Irish homeowners haven't checked the rebuild cost of their homes in the last year. This is despite the sudden and unexpected increase in the cost of building materials, recently reported by the Central Statistics Office (CSO).
For example timber has increased by 64%, cement has gone up by 11%, electrical fittings have risen by 18.5%, and the price of plaster and glass saw a hike of 30% and 10.7% respectively over the past 12 months.
The study also revealed that 23% of the Irish homeowners surveyed have never checked the rebuild cost of their home, while only 44% have done so in the past year.
Knowledge gap
The study, which was conducted in early May 2022, reveals a noticeable knowledge gap among Irish homeowners in understanding how their properties are insured, and the difference between a property’s value and its rebuild cost.
The value of your property is what the market dictates it will cost to buy your home. This is different to the rebuild cost of a property, which is the cost to rebuild your home should it be damaged or destroyed.
We explain the difference in more detail, as well as other important things, in our home insurance guide which you can read here.
Meanwhile, Allianz revealed that two-thirds are either unsure or totally in the dark about the difference between the two.
43% of those surveyed were unsure about the difference, with 23% having no idea.
On a more positive note, just over one-third (34%) understand the difference.
Responding to the findings of the study, Chief Customer Officer at Allianz, Geoff Sparling urged home insurance customers to fully inform themselves and to take the necessary steps to avoid being caught out by current and future inflation levels.
Insurance can be complicated in some areas and we want to make sure our customers understand how inflation related to the construction sector in Ireland could affect them and assess timely preventative measures.
That’s why we encourage all our customers to check the sum insured on their properties on a regular basis to make sure they have the appropriate level of cover in place.
Insurance cover
The research revealed that the majority of homeowners (78%) surveyed did not contact their home insurance provider to better understand the value of their home versus the cost to rebuild it.
On the other hand, only 14% contacted their home insurance provider in the past year to better understand this, while another 8% did so over a year ago.
Will the new levy on concrete leave more people vulnerable to underinsurance?
Yes.
It is likely that the new 5% levy on concrete products announced by the Government in the 2023 Budget will cause house rebuilding costs to increase further as builders try to offset the rise of concrete products on prospective buyers and homeowners.
According to estimates by the Society of Chartered Surveyors Ireland (SCSI), this new levy will increase the price of a three-bed semi for example, by €1,200, meaning many homeowners nationwide will not have the correct cover for their homes.
How do I know my rebuild cost?
The SCSI has a handy House Rebuild Calculator. Homeowners can simply input the key details about their home, such as its size, type and location, and it will then calculate an estimated rebuild cost for you.
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If you want to find out more about home insurance, have a read of our informative pieces below.
- Find the best value home insurance with bonkers.ie using our Quickstart guide.
- Read our piece in which we answer 12 common home insurance questions.
- Here are 8 reasons why you could be refused home insurance.
- Discover the reasons why your home and car insurance costs have gone up.
You can read up on the latest to do with home insurance on our blog and guide pages.
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