With household bills on the increase, it may be opportune to revisit the cost of the rebuild of your house.
The SCSI Tender price index figures show national construction tender prices have increased rapidly in the past year. This is due to pent up demand post Covid, supply chain constraints, shortage of certain materials due to conflicts, increase in the cost of materials and labour shortages.
Insure the reinstatement Cost not the Market Value
The amount you have your property insured for is known as the reinstatement cost. The reinstatement cost is based on the cost of rebuilding your property. The land is separate and paid for. It is not the market value of your property.
With the construction cost increases, there will be an impact on the reinstatement cost and therefore amount you have your home insured for. Bearing in mind that construction costs have increased by more than 20% in the past year, this may mean your property is underinsured. Alternatively, you may have your property insured for the market value as you see house / property prices go up and you want to make sure you do not lose out if there is a fire or damage to the property. SCSI predict property prices to rise by 4% over the next 12 months.
It is important to get an independent valuation of the rebuild costs – separate to the land value and market price if you were to sell it now. Insurance companies will only pay out for rebuild and indeed it is vital that you have that rebuild covered at least as they may only pay a percentage of the rebuild cost if you underinsure your property.
Danger of underinsuring
If your property is underinsured, you will not get the full costs for rebuilding it in the event of a claim. You need to look at your home insurance on a regular basis to ensure you are fully protected.
An Oireachtas committee has heard that inflation is likely to lead to a rise in home insurance premiums. Chief executive of Insurance Ireland Moyagh Murdock said that inflation is "having a major impact, and it's unquestionable that it feeds into everything we do." "Insurance has to cover the risk and these costs go up, you want to make sure you're properly insured," she said, and cited recent concerns from the Central Bank over "the risk that people are underinsured in their home insurance policies". "Undoubtedly construction costs are hitting everybody, with labour shortages adding to this” she said.
Do I need home insurance?
Technically no but what if there is a fire or damage to your property – you will have to pay for the rebuild if you don’t have insurance. Most lenders will insist on mortgage applicants having at least a buildings insurance policy in place as part of any mortgage agreement.
How do I value my house / property?
With prices on the increase and uncertainty in the marketplace due to shortages of materials and labour, it is very difficult to self-assess the rebuild costs.
This is where a professional Quantity Surveyor can assist. A firm like McGrath QS, based in Dublin, Wexford and London but serving the whole country, can be of assistance. It is quite complicated and an experienced QS is very aware of industry-wide price increases, and how to assess your house based on the age of the home and value, construction type, location, and exposure to catastrophes, among other factors.
If your house was built especially for you – then the rebuild cost gets more complicated naturally. High value houses need a professional QS valuation if it is be accepted by an insurer as being the correct rebuild cost.
Is the QS valuation accepted by insurers?
Yes. McGrath QS are members of SCSI Society of Chartered Surveyors Ireland and hold ISO 9001: 2015 accreditation. A rebuild cost by a professional QS is vital if you want to convince your insurer of the real rebuild cost.
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