FBD, Ireland’s largest domestically-owned insurance company, warned last week that insurance premiums are to rise again this year. Last year home insurance rates rose 14pc. Some analysts think they could rise again by the same amount.
Insurers losing money
Insurers lost €148m on property insurance in 2009 – we have not got 2010 figures yet. But the December/January freeze is estimated to have cost €750m in claims. More claims tend to be made during a recession, while burglaries rise in a downturn.
Householders should be on guard
With insurers under profit pressure, the big losers are set to be householders.
Here is what to look out for:
Insurers are inserting a new condition into policy contracts - higher excesses. An excess is the amount you have to pay out of your own pocket before being able to claim. (The idea is that you have to suffer some loss before turning to the insurer). Excesses of €500 are becoming common, with €1,000 for water damage.
Contracts now contain more exclusion clauses. If you live in a flood plain or an area with a previous water-damage issue the contract may state that you will not be covered for water damage.
Claims are being questioned. It also takes longer to check and process claims.
Repairs will only be paid for by the insurer if carried out by a builder on a pre-approved panel. The Allianz Approved Repair Panel is an example of this.
Negative equity homes over-insured
Properties that are in negative equity are often over-insured. This is because the rebuild aspect of the insurance is often based on a boom-time house valuation, or boom-time building costs. Rebuilding costs are probably down around 20%. Check out the website of the Society of Chartered Sureyors, www.scs.ie.
Don’t under insure conttents
Insure your contents for the amount it would cost you to replace them. If you do not you may be subject to the average clause. This is a condition that limits what you can claim if you are under-insured. For example, if the contents of your home are worth €40,000 but you insure them for just €20,000 you are under-insured by 50%. If your contents are stolen, the most you will get 50% of the total damage - €20,000. Likewise, if you are over-insured you will not get more than you lost. The idea is that you cannot make a profit on a loss.
Tips:
w Some insurers have had fewer claims than others. Shopping around can save you several hundred euro.
w You can get a discount if you have no previous claims; there is somebody over 50 living in the house; the residents of the house are non-smokers; the house has an alarm; you have a smoke detector installed; and you have another insurance policy with the same company.