Is There a Risk I’m Underinsured – And If So, Should I Be Worried?
Caeva O'Callaghan | April 16th, 2020
Underinsurance is a massive headache, but one that’s often discovered too late. Many people are at risk, so to find out more, read on to discover what it means and how you can avoid it.
Underinsurance is a massive problem, which can only lead to big headaches later on if and when you need to claim on your home insurance. If you’re underinsured, it’s a problem you need to fix right away.
Put simply, if you aren’t insured to the full amount you need your provider won’t be able to cover all costs. If you have a fire, burst pipe, storm damage or other disaster, you may be left out of pocket.
In this article, we’ll cover the following questions:
- What does it mean when I’m underinsured?
- Is being underinsured dangerous?
- How do I find out if I’m underinsured?
In other words, you should always keep your insurance provider up to date with your details. This includes what’s in your home, as well as any additions or renovations you carry out.
Overinsured vs underinsured
Overinsurance means you’re paying too much for the cover you need, and you’d save money by revaluing your home and items. It’s also possible you may have an item insured more than once under different types of policy such as home insurance and insurance cover through banks and credit cards. While it’s never great to be wasting money, overinsurance isn’t as much of a problem as underinsurance.
Underinsurance means you’re paying too little for the cover you need. This happens when your insurance provider isn’t aware of the true cost of replacing your home and belongings should the worst occur. Underinsurance can happen deliberately – for instance if you decide to hide things from your provider in order to keep your premium lower.
Do this, and you shoot yourself in the foot. Because when you really need your insurance, it won’t be there for you. It’s also easy to find yourself with inadequate insurance by mistake, when you’re not sure how much your property is worth.
Usually, people only become aware they’re underinsured when it’s too late. They need to make a claim, and the final settlement turns out to be a lot less than they need. This means they’ll be paying for repairs and replacements out of pocket. During the most stressful time imaginable, this is an added headache no one needs.
So, the sum insured for buildings and contents should always reflect their full value. Remember: that’s the maximum figure that your insurer will pay out.
What happens when you make a claim
When you have a partial loss or damage and your contents or building cover – or both – is worth more than the declared sum insured, your claim payment will be reduced in proportion. In other words, by the same percentage that your insurance company considers your sum insured to be less than the actual reinstatement value.
If you have a total loss on your home insurance policy, your insurance provider will pay no more than your declared sum insured for your buildings and contents. For example, if your home burns down after you insure it for €200,000, your provider will pay no more than €200,000 even if it costs €250,000 to reinstate it.
Many insurers have a clause in their policies that allow them to arrange for one of their suppliers to repair, reinstate or replace a damaged building or content. This helps everyone keep costs down, and means your work is done quickly by someone your insurance provider trusts.
Make sure you’re insured properly
To ensure your buildings and contents have the right cover, you’ll need to really think about everything you’ll need. Don’t forget about the cost of replacing your phone or laptop, fridge and washing machine.
Carpets, upholstery and furniture are all expensive to replace. And what about your garden? If you had to start all over, how much would your shrubs, pots, power tools and gnomes cost you new?
It’s true that when you don’t cut any corners, your premium will cost more than if you were underinsured. But remember, you’re paying to protect yourself, and your possessions. This is what insurance is for.
Nearly all of the insurance companies use the rebuilding calculator provided by the Society of Chartered Surveyors. It is available on their website www.scsi.ie and is very easy to use. If you use this as a guide, you should not have a problem if you have a partial loss claim.
If you are unsure or worried about being under-insured call us immediately in QuoteMe.ie
If you have any questions on whether you are under-insured for your home insurance, call us and talk to our insurance experts. We are experts in all matters related to getting your house insured. We can guide you on getting accurate valuations for your home cover. We are available for direct phone calls between 8.30am and 5.30pm each weekday on 0818 224433 or 042 9359051.