There has been a lot of talk recently about underinsurance in the media, but what it is?

Underinsurance happens when the sums insured are lower than the cost of rebuilding or repairing your property. Rising building cost mean that we really need to reassess how much it would cost to rebuild our home from scratch. Sometimes it’s hard to know where to start when calculating the rebuild cost of your property, we recommend using The Society of Chartered Surveyors Ireland rebuild calculator. This website can be used as a guide. You may decide to get your property surveyed if you want a more accurate valuation.

Have a look at the example below of how you would be financially effected by underinsurance:

Patrick and Patricia take out a home insurance policy with Buildings sums insured of €350,000.

A couple of months later, Patricia notices a massive leak in the upstairs bathroom. The leak in the property causes €100,000 worth of damage.

  • During the claims assessment, it is discovered that the correct rebuild cost is €500,000.
  • The property is underinsured, theAverage Clauseis applied to the claim and Patrick and Patricia are notified that the claims payment will be reduced. See  calculation below

Claims settlement:  €350,000 (Sum Insured) X €100,000 =  €70,000 (Claims Payment)

€500,000 (Rebuild Cost)

The reduction due to underinsurance is 30% in this case. As a result, the maximum payment Patrick and Patricia will receive is €70,000.

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