Homeowners face huge losses in the event of their property being destroyed – as spiralling construction costs leave most underinsured.

The latest Society of Chartered Surveyors Ireland (SCSI) statistics show that rebuilding costs in Galway have rocketed by 20% in 12 months, and as a result, the majority of homeowners with an insurance policy have their property undervalued.

That’s according to Linda Lyons, Claims Manager with CMG – the country’s largest independent loss assessor – who warned that those who fail to update their property valuation face a major shock should they need to claim against their policy.

And while increasing the valuation of your property might result in a small hike in the premium, it could cost thousands more should tragedy strike – leaving some people unable to restore their home.

“A €50,000 increase in cover might cost €25 extra, but people should shop around. If you’re underinsured, you’ll have a shortfall of whatever the difference is when you go to make a claim,” said Ms Lyons.

That meant if your property was valued at €200,000 but it was only insured for €120,000 and it was totally destroyed by fire, only 60% of the costs would be covered by insurance, explained the Athenry-based assessor.

“The insurance companies must love it – for the sake of a €50 saving on your policy, you could be saving them €30,000 to €50,000 when it comes to paying out.

“Given the rise in construction costs, most people will be underinsured and unfortunately, it’s up to the policy holder to revisit their policy. The insurance company will say it’s not their problem so when you’re left with a lower settlement, they will say that’s your problem,” said Ms Lyons.

She said she had seen cases where damage of €20,000 was caused and the pay-out was just €8,000, but if an entire property is destroyed by flood or fire, the shortfall could be the difference between being able to reinstate the property and not.

In addition, if a property was being rebuilt, it would have to be done to the latest building standards and regulations – and that cost also needed to be factored in.

Those seeking to ensure they have adequate cover should use the SCSI’s House Rebuild Calculator on their website as a first port of call.

“Once people know the square footage of their house, they can use that and it is excellent.

“The only problem with that is it doesn’t take into account more bespoke items. You could have a bespoke kitchen valued at €100,000 where the average kitchen might be valued at €15,000 and that is something you need to consider,” said Ms Lyons.

Those who want the most accurate valuation can get one by using the services of companies like CMG, who can carry out a Value at Risk Survey.

“I’m also happy to take a call from anyone who needs advice. Unfortunately, it is something that people need to look at on an annual basis and the way things are going in relation to price increases, I would say it’s necessary.

“We all want the cheapest policy we can get, but it’s only when you’ve a claim that you even look at a policy properly and it’s too late then,” said Ms Lyons.