Homeowners are taking a new savvy approach to insurance, writes LauraSlattery.
In the excitement of buying a new home, too many people have traditionally been only too happy to leave the small matter of insuring the roof over their heads to the lenders, with the result that householders were often saddled with less-than-competitive quotes.
But with premium rises in home insurance ranging from 10 to 40 per cent over the past couple of years, the stakes are getting higher.
Increasing numbers of savvy consumers are shopping around for home insurance almost on an annual basis, searching for the cheapest premium the same way many do for their motor insurance. And insurers are lining up to advertise their policies.
One attempt to tempt new business comes courtesy of Bank of Ireland, which has announced that it will sell 12 months' home insurance cover for the price of 10 to all new customers who sign up before August 31st. This represents a 17 per cent saving for new customers.
The bank is also reminding potential customers that not all home insurance policies are the same.
So what terms and conditions can homeowners expect from their insurer? Is the Bank of Ireland offer worth the hassle of a switch?
How much insurance do you need?
First of all, homeowners need to calculate exactly how much cover they need.
Home insurance is divided into two categories: buildings insurance, otherwise known as "the sum insured" and contents insurance.
The amount you need to insure is the cost of rebuilding your home in the event of a disaster such as a flood or fire, not the market value of the home.
The Society of Chartered Surveyors (SCS) produces an annual guide to help homeowners calculate this amount. It features a table for the cost of rebuilding different types of standard houses - terraced, detached, semi-detached and bungalows - in different parts of the State depending on the square footage of the house.
The table opposite shows insurance company quotes for two houses. The first a 20-year-old, three-bedroom, semi-detached house in the Dublin area. The second is a newly built four-bedroom detached house in the Galway area.
Based on typical sizes and the SCS's rebuilding cost per square foot, the house in Dublin is calculated to need cover of €160,000 and the Galway house should be insured for €140,000.
Both quotes include contents insurance of €40,000.
Some companies cover contents to a value that is a percentage of the buildings sum insured, so the quotes for First Call Direct, Hibernian and Permanent tsb are based on contents cover of 30 per cent of the sum insured: €48,000 for the Dublin property, and €42,000 for Galway.
AIB's contents cover is unlimited, which may make up in some way for its expensive premiums.
The table shows that Bank of Ireland is at the cheaper end of the market when you consider that its policy automatically includes cover for accidental damage to contents, for example, smashed ornaments or damage caused by a leaking water pipe.
One Direct quoted the cheapest rate in the Dublin example. However, its rate, once accidental damage is included, is higher than First Call Direct's, which quoted the cheapest rate for the Galway house and offers the lower premium in both categories when accidental damage is included.
The quotes do not consider the cost of "all risks" cover, which insures items such as jewellery and electronic equipment when they are taken from the home.
This cost ranges from €1.20 to €1.65 per €100 insured for specified items and can be as high as €2 per hundred insured for unspecified items.
What to look out for
Royal & Sun Alliance came out slightly cheaper than Bank of Ireland in the survey. However, its quotes do not include brokers' commissions and its policy excess - the amount of any claim that the policyholder must pay before cover kicks in - is higher.
It is worth noting that Royal & Sun, like FBD, the second cheapest insurer for the Galway property, applies what is known as the "average clause", which could affect the size of any payout in the event of a claim if the property is found to be underinsured.
For example, a house may be insured for €120,000 but cost €200,000 to rebuild. Under the "average clause", it is only 60 per cent insured. In the event of damage costing €10,000 to replace, the homeowner will receive only €6,000 from the insurance company.
AIB also applies the average clause to buildings. However, a spokesman for the bank said it had not applied it in any claims to date.
Hibernian applies the averaging clause if homeowners opt to insure contents at a set value rather than as a percentage of the sum insured.
Another thing to beware of is insurers that charge customers a higher rate if they want to pay by monthly instalments rather than through an annual premium.
Extras and discounts
The two quotes in the example are based on homeowners fitting smoke alarms and a house alarm, which can give a discount of 5-20 per cent on claims. Being part of a Neighbourhood Watch scheme also impresses some insurers. Other discounts available are typically age-related. For example, people over 50 years of age may get a 5 per cent discount and those over 65 a 15 per cent discount.
Some insurers offer lower premiums to customers who also have their motor insurance policy with the company.
Bank of Ireland gives a 5 per cent discount on premiums if customers opt for a higher excess of €152. First Call Direct and Permanent tsb, which both source their cover from insurer Allianz, offer a 10 per cent if customers opt for a €500 excess.
Bank of Ireland is also promoting the fact that its policy covers the belongings of students who move away from their parents' home to live in shared accommodation at college, up to a value of 20 per cent of the contents sum insured on the parents' home insurance policy.
As cover for students' possessions can be difficult to obtain, this may be an attractive policy benefit for some families.
