If you currently have or are thinking of getting Home Insurance, you need to understand the difference between Reinstatement Cost vs. Market Value.
Many people believe that the market value of the house (price when the property is sold on the open market), is the value for which the property should be insured.
However, the market value of the property is actually irrelevant.
Understanding what the Reinstatement Cost is:
Reinstatement cost is the amount necessary to repair or replace your entire home in the event of an unforeseen circumstance such as a fire.
Your insurer will reimburse you for the cost of rebuilding or repairing your home, based on the size and structure of the home that was lost or damaged.
It is advisable to talk to a building contractor or other building professional who will be able to help you estimate your rebuild value.
Alternatively you can also look up the Chartered Surveyors of Ireland website which assists with calculating your rebuild figure.
You only need consider the cost of the property’s structure and its associated systems, fixtures, and finishes in the estimate. Land value is only relevant for the house market value and should not be included in the amount of insurance you buy.
The reinstatement coverage on your home insurance policy helps a family to return to their home and usual quality of life with minimal financial interruption.
It is important to realise that reinstatement costs can change over time, so you should review your policy annually to make sure its cover meets your needs.
Similarly you must inform your insurer if you have renovated your property as these alterations may increase your property’s reinstatement cost.
Understanding what the Market Value is:
Just to clarify, the market value of your property is the amount that a buyer would pay to purchase your home and its land in its current condition. This is different to your home’s estimated reinstatement cost.
Market value is influenced by factors beyond the material and labour costs of repairs or reconstruction, such as land, proximity to good schools, local crime statistics, and the availability of similar homes.
Please note: insuring your home for its market value exposes you to the risk of having incomplete coverage in the event of a claim.
For example: if a fire or other insured peril destroys your home and your property is not adequately insured, the family would either have to make up the difference or build a new, less expensive home.
Therefore, it is extremeply important to ensure you have adequate cover should you ever need to make a claim on your House Insurance.
Need Home Insurance Advice?
While our team cannot provide you with your rebuild value, they can certainly answer any questions you may have about a Home Insurance policy.
Request a Call Back today for advice and we can provide you with the most competitive quote from a market of over 15 different insurers.