Given the current buoyant property market, many of us are aware of what our property is worth. That is how much it valued at now if we were to sell. But do you ever consider how much it would cost to rebuild? There is a difference between the property valuation i.e. the market value and the rebuilding cost i.e. the reinstatement value of the property. It is the reinstatement value (the re-building costs) that your home insurance policy is based on.
Valuation Vs Re-building
At the end of 2021, homeowners had to submit an updated valuation of their property. This was for the purpose of Local Property Tax (LPT). It was the first time in almost 5 years that this had to be done. The change in valuation in many cases was significant.
In the same way that valuations increase, so do re-building costs. Inflation, demand and many other factors can affect how much it would be to re-build your home, should something happen to it. The re-building cost should include the cost of labour and materials for the structure itself. It should also include your contents and personal possessions.
Home Insurance and Re-building
Your Home Insurance is based on the re-building costs and contents at the time that you took the plan out. Was that 5 years ago, 10 years ago or perhaps even longer. How have costs changed since then? It is very important that you re-assess your level of cover every year, based on current rebuilding costs. This also allows you to makes allowance for any improvements or extensions that you may have made since your last renewal date
How it works
If a house is insured for €220,000 but the total cost to reinstate it ends up being €270,000, the insured party would receive only the €220,000 to reinstate the house in the event of the total loss. The insured party would need to provide the balance of €50,000. Similarly if there is a partial loss, they would only receive a partial payment pro-rata payment towards the loss.
According to figures released by the Society of Chartered Surveyors in Ireland (SCSI), the price of building is rising at twice the rate that it was before the pandemic. So it’s increasingly important to ensure you regularly review the plan you have in place to ensure it is still adequate to cover your costs.
Here’s a really handy Home Rebuild Calculator which can help you assess your own situation.
And remember here at Premier Insurances, we have access to the main insurance providers and our expert staff can guide you through all you need to know to buy the most flexible cover to suit you needs. Just get in touch today!