| Home Insurance Overvaluation |
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| Written by Seamus Maguire |
| Tuesday, 27 July 2010 09:27 |
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We are all too well aware that the value of residential property in Ireland has fallen dramatically in the last two years. It is fair to generally say that prices have fallen at least 30% from their 2008 levels and in some areas by up to 50%, particularly in the midlands of the country.
We are all too well aware that the value of residential property in Ireland has fallen dramatically in the last two years. It is fair to generally say that prices have fallen at least 30% from their 2008 levels and in some areas by up to 50%, particularly in the midlands of the country. With such a fall in the value of houses, you should prudently consider what value you are insuring your home in the event of a disaster befalling you and your house being destroyed. The value you insure your house, or any property for that matter, is not what it would fetch on the open market, but the actual replacement cost. Because higher values are declared on home insurance policies, higher premiums have to be paid by the householder. Many people are unaware that there is a big difference between what the market value of their home is and what it would actually cost to reconstruct it in the event of it being completely destroyed. During the housing boom in Ireland, the value of houses rocketed skywards. So too did the cost of labour and materials. So when it came to renewing their policies each year, people increased the values in line with what the latest estimate of the worth of their home was at the time. They might guess that their house was worth 100,000 more than it was last year and insure it accordingly. Naturally their premium increased, but they comforted themselves by the fact that if anything happened then they would have a large payout from the insurance company. Just because you, or even an independent valuation expert, consider your home worth, say 1 million, for example, does not mean that this is what you will receive from your insurer if your house was totally destroyed in an incident. For arguments sake, let's say your home is approximately 2000 square feet in size and worth 1million if you were to sell it. If it were totally destroyed and had to be completely rebuilt, an insurance assessor will calculate that it would cost 250 per square foot to reconstruct it. You will then end up getting 500,000 from the insurance company which you will pay the builder to leave you with a home of the standard you had before. You are not going to make any gain on it. Therefore, you were paying double the premiums over the years in the misguided belief that if something happened to your home, you would make a tidy profit. Be accurate in the value you put on a proposal form. It is not the market value of the house. DISCLAIMER: This article is provided as information only and is not to be taken as financial advice. Looking to find the best deal onHome Insurance, then visit www.yoursite.com to find the best advice on House Insurance for you. |