More on home insurance re-building costs

I’ve written in the past about the re-building costs of houses in 2009 and the impact that it should have on home insurance premium quotes.

The essential premise is that with the fall in the property market, the actual cost to rebuild your house should have fallen, and since that is part of what your home insurance premium is based on, your premium costs should actually be falling.

The Financial Regulator states that:

You should insure your home for the amount it would cost to rebuild it, or the reinstatement value. This is different to the market value of your home, which is what you would get if you sold it. You can get details of current rebuilding costs from the Society of Chartered Surveyors.

Yet, I have recently received three different complaints from people where their insurance company (or their mortgage company who requires the insurance as part of their T’s & C’s) have actually insisted that the person INCREASE the value of the property for insurance purposes.

I’m struggling to work out why mortgage providers would want to have these values overstated. Obviously they’d want to make sure they’re covered themselves, but if standard practice in the past was to accept the SCS rebuild cost values in the past, what’s changed now?

I know probably why are insurance companies doing this? They’re doing it so that they can charge higher premiums to bolster their profits (or reduce their losses).

What can you do?

  1. First of all, ask your insurance company for a written confirmation of their justification for seeking an increase in the value of the property being insured. You may need this later.
  2. Now check the updated Society of Chartered Surveyors Guide to House Rebuilding Costs for 2009. Work out the rebuild costs for your house, and ask the insurance company to insure your house on the basis of that value – explain where you got this value from, and confirm that this is what the Financial Regulator says that home insurance costs should be based on.
  3. If the insurance company still won’t insure for that value, then ask them again in writing to confirm why they won’t insure the house at that particular value.
  4. Submit an official complaint to your insurance provider along the lines of the fact that they’re going against the recommendations of the Financial Regulator with regards to how they should be valuing the house for rebuild cost purposes.
  5. If you don’t get anywhere with your complaint with your insurance provider, they you should raise a complaint with the Financial Services Ombudsman office.

Of course, you could just find the rebuild cost from the SCS documentation linked above and just go to a few other different insurance companies with the new numbers and get quotes from them. You’re likely to get a better quote from at least one of them, and you won’t have to deal with the crap above.

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3 Responses to More on home insurance re-building costs

  1. Marian O Dwyer June 22, 2012 at 17:52 #

    I had an insurance claim following a burst pipe during the big freeze in December 2011. My insurer told me that my insurance would not increase that much I would just loose my no claims discount. But they re valued my house, upped the contents cover, and my insurance ended up at 300% the original cost., The person who told me I would not be majorly effected is on long term sick leave and the new person I spoke to said that is the increase because of my claim. I cannot shop around as no one will take me unless I havn’t had a claim in 3 years. So I feel helpless with an insurance cost for my home where I live alone and work part time of 1400 euro. Is there any way I can check out if this is a justifiable increase because of one claim since I moved into the house in 2002.

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