Tag Archives | Home Insurance

The “Shoparound Index”. Irish rate of deflation underestimated?

I recently had an interesting conversation with someone that’ll lead to a few posts here on ValueIreland.com in the coming weeks.  The first of these was where they introduced me to the “Shoparound Index”.

The “Shoparound Index” is used by the AA in the United Kingdom as they believe that it better illustrates how the cost of insurance is increasing or decreasing compared to any published statistics that take just the first quote presented in any research.

Given that most of us won’t take the first quote we receive for any insurance renewals we get (should be all of us), we’ll make a couple of calls to see if we can get a better offer elsewhere.

On most occasions, we’ll actually find that our own insurance company will actually reduce our renewal quote on the first call without any qualms or pushback at all.

It makes sense therefore, that any insurance costs that are included in any published statistics should be an average of a few quotes rather than taking the first quote which will nearly always be higher – sometimes by upwards of 10-15%.

Take, for example, the cost of insurance as published in the recent CSO Consumer Price Index information for June 2009 ( I haven’t had a chance to check the recent report but I believe the numbers referred to here continue to be relevant for July).

This table indicates that in the past 12 months that home insurance has increased by nearly 25%, health insurance by 21% and car insurance by just over 13%.

I’m waiting for feedback since early August from the Central Statistics Office as to how they calculate these insurance cost increases – whether they’re based on a single insurance quote request, or whether they take an average of 3 or more quotes.

As of now, if we were to assume that they don’t take an average of 3 lowest quotes, it’s quite reasonable to assume that insurance costs haven’t increased as much as is indicated above and that since these are the biggest increases across all components of the CPI, then our deflation rate could actually be higher than is reported.


Tips for Cheaper Home Insurance

From our original ValueIreland.com Tips pages, here are some top tips which should help you get cheaper home insurance compared to what you’re paying at the moment. These tips are items that you should consider when either renewing your insurance policy (every year) or when purchasing new insurance for your new home purchase.
  • Shop Around – As with all other purchases that you make, shop around. There are numerous insurance companies providing home insurance on the Irish market. You should take the time to contact most, if not all of them, to get a quote. Provided you have no tie in to your mortgage lender, you can go directly to an insurance company or via an insurance broker.
  • Someone you can trust – You should always go with a reputable and established company. There’s no point in taking risks. Check if they have industry accreditation. If necessary, ask around amongst colleagues and friends to see if they’ve heard of a particular company. And remember, no matter how good a website is, the company should have a call centre, sales staff, and a proper postal address for their office – if none of these exist, be careful.
  • Multiple policies with same company – Some companies provide discounts if you hold more than one insurance policy with them. So if you already have car or life insurance with a single company, ask for a quote for your home insurance, and ask if they can offer you any discount seeing as you’re providing them with all of your insurance business.
  • Special Offers – Always keep an eye out for special offers that may be offered at various times by different insurance companies. For example, look out for money back guarantees such as “If you find a cheaper deal elsewhere, we’ll refund the difference”. This can assure you that you’re not being stung. Another promotion may be something like “one month’s insurance free if you pay monthly by direct debit”. These can give good value.
  • Only buy cover you need – As with car insurance, only buy the cover you need. Make sure that you need all the cover that you are getting. There is no point paying for cover of the shed or garage contents if you do not have a shed or garage. Asking for this cover to be removed should reduce your premium.
  • Have your policy to hand – When ringing around looking for quotes, have your existing policy with you so you can answer the relevant questions, and ask important questions of your own. If you’re sure your existing policy meets your requirements, use this as the basis for requesting a quotation from a potential new insurer.
  • Check the small print – Remember, sometimes just because an insurance company has sold you a policy this does not mean you’re eligible to claim on it. If you have any concerns, get them to confirm to you that you are covered in particular situations – in writing if possible.
  • No Claims Discount – Ensure that the insurance company knows if you have not claimed on your home insurance in the past. As with car insurance, no claims discounts increase with time. This could save you up to 20-30% after five years without a claim.
  • Payment Options – If you are able, it is an idea to pay your full insurance premium in one lump sum rather than through monthly repayments. This can save you money as some companies may charge you a rate of interest for the privilege of paying monthly, on top of your premium.
  • Security Benefits – Remember that having security systems fitted (security locks and alarms) will have the effect of decreasing your premium. It is also possible that if there is a local Neighbourhood Watch scheme, by joining it, you could cut up to 10-15% off your premium also.
  • Larger Excess – You could bring down your premium costs by volunteering to pay more of an excess towards the cost of each claim. Only do this if you can afford to do so however.
Other points to remember that may increase your premium costs –
  • Bear in mind that not all security discounts mentioned above will necessarily be offered by an insurer. If you live in what they consider to be a really high-risk area, it may be a requirement for you to have security systems fitted and be part of a neighbourhood watch scheme just to get any insurance at all, let alone a discount.
  • Cover for portable items to be included on your home insurance can increase your premium. For example, a bicycle or a laptop computer if included on your home insurance policy is likely to increase your premium.
  • If you wish to cover your jewellery on your home insurance policy, it may actually be worth an amount over the limit for individual items. It is also portable, as above, and may then add further to your premium.
  • Do you live in an area that is liable to flooding? With flooding becoming more prevalent in Ireland (particularly Dublin) over the past number of years, your insurance company may be keeping this in mind when quoting you higher home insurance premiums.
  • Do you carry out a business from your home? Does this involve having valuable equipment in the home for the purpose of carrying out that business? This is likely to increase your premium. You could investigate insuring such equipment separately, as a business expense, rather than on your home insurance.
  • Be careful also about ‘absence clauses’ Many of the companies have quite specific time limits on how long the premises can be ‘un-occupied’ and quite interesting rules about what ‘un-occupied’ actually means. They alter the terms for this regularly, I found that from one renewal to another they had halved the unoccupied period.

Mortgage companies, Insurance companies and re-build costs – what’s going on?

You’ll have read three posts already today (here, here and here) about how insurance companies and mortgage providers are trying to force Irish consumers to overstate their rebuild costs for their home insurance policies.

For the insurance companies, I can see the motivation – if the rebuild costs are overstated, then the risk is higher, and therefore they can charge higher premiums at a time when they’re losing money elsewhere.

I’m kind of at a lost as to why mortgage providers are insisting that rebuild costs are boosted over and above the values they should actually be according to the Society of Chartered Surveyors (SCS) rebuild costs documentation.

In the mean time, there are a few questions that I have on this whole thing (but remember, I love a conspiracy, so none of these might have any relationship to reality):

  1. Cross selling – if the mortgage provider and the home insurance provider are the same company, then you could understand that one division of the organisation that is unlikely to be making much money these days (mortgages) is doing its best to boost revenue for other divisions (insurance).
  2. Past profits – The focus these days has been for people to find out the rebuild cost rather than the actual value. I wonder in the past how many people insured their homes at the market value – and therefore provide an overstated windfall for insurance companies. So, not only are the losing money now on the premium difference between rebuild costs in the past, and rebuild costs now – but they’re actually losing on the difference between rebuild costs today and the market value at the height of the property boom.
  3. What happens when there’s a claim – If my mortgage company insists on a rebuild cost of €400,000 for my house, but the actual cost is only €290,000, and my house burns down. If the insurance company pays out €400,000, and my house is rebuilt for €290,000 – who gets the €110,000?

If anyone has any thoughts on this, I’d love to hear from you.


Another mortgage company looking to overstate re-build costs for insurance

Here’s a comment posted recently by a ValueIreland.com reader which is linked to todays topic – rebuild costs for the purposes of insurance policies:

I recently renewed my home insurance with a different provider and amended the building sum insured in accordance with the Society of Chartered Surveyors (SCS) Guide to House Rebuilding Costs published.

I forwarded details to my mortgage provider of the renewed policy and received a response suggesting I reassess the current building sum insured.

I responded and advised that I had used the SCS’s Guide.

I received a further response from the mortgage provider advising that in order to change the building sum insured for your property, the mortgage provider will require a current valuation report drawn up and sent to us by your Valuer/Estate Agent.

The Financial Regulators – Guide Home Insurance Made Easy,on Page 4 advises:

“You should insure your home for the amount it would cost to rebuild it. This is called the reinstatement value. It is different to the market value of your home, which is the amount you could get if you sold it. The market value includes the value of the land your home is built on and the location it is in, but the reinstatement value of your home only covers the cost of rebuilding it. To get a rough estimate of the cost of rebuilding your home, use the home-building cost figures in the ‘Guide to House Rebuilding Insurance’ available from the Society of Chartered Surveyors”

Requiring a valuation report to amend the reistatement value of a property is an onerous and costly requirement.

I have lodged a formal complaint with the mortgage provider and I am still awaiting a response.

So basically I am required to over insure my property or get a valuation report which would cancel the savings I have made on updating my insurance policy!!

The requirement above to get an actual market valuation rather than using the SCS rebuild costs valuations is particularly strange.


Rebuild costs – mortgage company overstating rebuild costs

Following on from this mornings post about home insurance premiums and re-build costs, here’s one e-mail that I received from a ValueIreland.com reader:

I have a query regarding re-building costs and hope you may be able to offer some advice.

We have a 4 bedroom bungalow, approximately 3,200 sq ft, in Connemara, Co. Galway.  We have a mortgage of €220,000 and our now 5   year old home was valued at €290,000 roughly 3 years ago.

We  recently re-insured with a re-building cost of €350,000.  However, our mortgage providers will not accept this and want us to up this to €400,715.00 when I queried this they came back with 423,000?!

In the current climate we feel that this is way to much as we feel building costs have gone down not up as they have suggested!

This will up our insurance and unfortunately as with most of the country we’re doing our very best to keep head above water and every penny is needed and we don’t feel we should have to back down on this matter.

This kind of behaviour by mortgage companies is unforgivable. In very few scenarios will the rebuild costs of a house increase by such a margin in the current property climate.

Given the difficulties people may have in meeting current mortgage commitments and possibly not getting mortgages elsewhere in the current economic climate, these people are essentially putting a gun to the head of the home owner.

They won’t want to <!– /* Style Definitions */ p.MsoNormal, li.MsoNormal, div.MsoNormal {mso-style-parent:””; margin:0cm; margin-bottom:.0001pt; mso-pagination:widow-orphan; font-size:12.0pt; font-family:”Times New Roman”; mso-fareast-font-family:”Times New Roman”; mso-ansi-language:EN-GB;} @page Section1 {size:612.0pt 792.0pt; margin:72.0pt 90.0pt 72.0pt 90.0pt; mso-header-margin:36.0pt; mso-footer-margin:36.0pt; mso-paper-source:0;} div.Section1 {page:Section1;} –>

jeopardise their current mortgage arrangement and many are likely to comply rather than kick up a fuss.

What odds that this mortgage provider also provides the home insurance for this particular consumer?


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.


Watch out when renewing home insurance

I’ve referred recently to the issue of rebuild costs not necessarily dropping when it comes to calculating the premium for home insurance.

A couple of people have highlighted to me a slightly related issue that is a little more concerning.

When calculating renewal premiums costs, these people have seen that the insurance company has acutally increased the value of property and contents.

Yup – in a time of falling costs and prices, insurance companies are trying to get away with increasing the value of replacing homes and contents – in some cases by up to 16% and 7% respectively.

If you see this on your insurance quote, make sure you query it and get the numbers changed if possible.

A further issue highlighted by a reader when as follows:

Also  and  most  worring, accidental  damage  to  buildings  and  contents   is  “Not  covered”
There  is   a  policy  excess  which    covers  the  small  damamges.

I  rang  up  about  this.

The  following  examples  were  given.

Some body  knocks  over  the  TV.

Somebody  leaves  a cigarette  burn on a  sofa.

If    the  sofa  catches  fire  and  burns  the  house.  The  will  pay  for  the  house  but  not  the  sofa.

This  looks  like  lawyers  talk   to  sell a  policy  whcih  could  be  worthless. I  cannot  see what   would  prevent a  company  from  disputing  any  claim  as  accidental  damage.

The reader is following up with the Financial Services Ombudsman.


Home Insurance and Rebuilding Costs

In an article I wrote for the Irish News of the World recently about the cost of insurance, I highlighted an issue that given current times is worth repeating in a post of it’s own.

We all know the property market is suffering badly now, so with cheaper costs for labour and materials, it could be worthwhile getting your rebuild cost for your hose re-estimated in case it could reduce your home and buildings insurance premium.

This was written about recently as well on the Tuppenceworth.ie blog – The Great House Insurance Mystery.

Basically, to get your mortgage you’ll have had to get home insurance to cover the rebuild cost of your home. As I pointed out in my article, those rebuild costs are likely to have come down recently given the tough times the country is experiencing.

Yet, as pointed out by Tuppenceworth, the standard reference material used in Ireland to calculate rebuild costs hasn’t been updated for nearly a year now.

This all means that we’re all more than likely overpaying on the rebuild part of our home insurance costs.


Tips on getting cheaper home insurance

While I was away on holidays, the Irish Independent published an article entitled “Top tips to make sure you get a bargain” by Charlie Weston.

The article some tips that are spookily similar to the tips in our Value Ireland tips for renewing home insurance..., originally published in March 2004.

We’d almost forgotten that we’d put together these tips, but it’s good to see a “news”paper picking up on them.


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