ConsumerValue: Insurance
3. Home insurance
Do I have to have home insurance?
You may face many risks if you own or are renting a home.
For example, your home could be damaged or destroyed by fire or flooding, you could be burgled or people could get hurt on your property.
Taking out home insurance can cover you for some of these risks.
You do not have to take out home insurance but if you have a mortgage, your lender is likely to insist that you have buildings insurance so that you can afford to rebuild your home if it is destroyed.
Remember you do not have to buy insurance from your lender and you are free to shop around.
What are the different types of home insurance?
Home insurance is usually sold as a single policy that includes:
- Buildings insurance, which covers you for damage to buildings
- Contents insurance, which covers you for loss of or damage to the contents of your home
- All-risks cover, which covers you for loss or damage to valuables (even when outside your home)
- Liability insurance, which covers you for injury to other people in or around your home
All household policies provide similar basic cover, but there can be a considerable difference in what they exclude and the extras included on your policy.
How are premiums calculated?
Home insurance premiums are influenced by a number of complex factors.
The following is merely an illustrative list of some (you will obviously not be able to change some of these), and is presented to assist you in understanding some aspects of the calculation of your premium.
- The size and type of the property to be insured (number of bedrooms, semi-detached; detached; apartment etc)
- The construction type of the property: conventional brick built; wooden frame; thatched etc
- The location of the property (urban/rural location, risk profile of the area including predisposition to flooding etc are all relevant here)
- Whether the property is fitted with an alarm
- Whether smoke detectors are fitted
- Do the windows have locks and are the external doors fitted with five lever mortice locks etc?
- Is the house occupied during the daytime or not?
Are there things I can do to cut down on my home insurance premium?
When you buy insurance, it is important to remember that the policy offering the lowest premium is not necessarily the best.
It is essential to read the small print first before you sign up. Some of the key issues to consider in influencing the cost of your insurance cover include:
- Rebuild cost: Your buildings cover will insure you for the cost of reconstructing your property in the event that it is in part or entirely destroyed. The rebuild cost is not the same as the “market value” of your property which will include the site value – something that cannot be “destroyed” in the same way as the physical property itself. If you over-insure for the rebuild value of your home, your insurer will pay out only at a level commensurate with the “real” rebuild value and not with the insured amount as you have stated, if that was inaccurate. As a general guide, rebuild values can be assessed using the guideline information provided and updated periodically by the Society of Chartered Surveyors, the “Guide to House Rebuilding Costs”. The most recent update to this guide at time of writing was from May 2008.
- Named items: Most policies will have a maximum value up to which any individual item can be covered. For many of us, there will be at least one or two items in our possession of a particular monetary value that we wish to protect under our policy – for many, this might include items of high value jewellery, but other relevant examples might be sophisticated pieces of electronic equipment, fine art etc. While an “average” insurance policy will typically cater for inclusion of a set number of named items, the addition of particularly high value items or a large number of high value items is likely to influence your overall premium. The general guide here is to ensure that you review your list of named items annually to ensure that it remains relevant and, in the instance of very particular items of high value, consider alternative means of insurance if relevant, which may prove more cost effective over time.
- Excess amount: Most standard policies come with an “excess amount” which is a first sum of any claim that you must pay yourself. Any amounts above the excess are then payable by the insurance company. It is usually possible to reduce your premium by accepting a higher excess amount on the policy. If, for example, you would be prepared to pay the first €1,000 of any claim yourself, it would typically be possible to reduce the premium below that payable for, say, an excess of €350.
When buying any form of insurance, but particularly in the case of home insurance, which covers such a very integral part of your assets, it is essential to read policy documents very closely and to ensure that you contract a level of cover appropriate to your needs.
How do I buy home insurance?
The key is to shop around and to get as many quotes as possible.
There are two main ways of buying home insurance:
- Buy directly from an insurance company, or
- Buy through an intermediary, for example a broker
You can shop around in person, by phone or online.
Home insurance premiums can vary widely depending on the insurer and how you purchase cover. Some insurers offer discounts for buying online or if you specifically ask for a discount.
To help further, our itsyourmoney.ie website has a shopping around checklist (PDF, 100KB) to help you ask the right questions when shopping around for quotes yourself and to keep track of discounts and benefits.
The itsyourmoney.ie website also publishes regular cost comparisons so you can see what insurers are offering the best value for money.