Calculating the level of house insurance

HOUSE and contents insurance is something we all need to take out at some point. For renters it’s generally simply a matter of taking out a contents policy, as the landlord normally shoulders the responsibility for insuring the building. But, whether it’s for your principal home or for a residential investment property, great confusion reigns about how much cover is necessary.

Many people mistake the market value of their property for the reinstatement figure, which is the figure used for insurance purposes. Yet there is no relationship whatsoever between the figures.

The market value is the price the property is expected to achieve when placed on the open market and will be determined by market forces. The reinstatement figure is the cost that would be incurred to rebuild a home subject to current building regulations.

The Society of Chartered Surveyors Ireland (SCSI) produces a guide of recommended rates ( scsi.ie). These figures vary depending on the type of building insured and its locaton. Using a traditional three-bed semi as an example, the location with the lowest replacement costs is the northwest of the country at €1,242 per sqm. Outside of Dublin, most cities and large urban areas, a recommended figure is about €1,455 per sqm. Needless to say, the most expensive region is Dublin at €1,869 per sqm. All these rates cover buildings only.

A note of caution — don’t under-insure your home for the sake of saving on your annual premium. If you need to make a claim, the pay out will be based on the actual cover in place not the recommended reinstatement figure, so you may find yourself with a shortfall.