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What is Underinsurance?

Underinsurance is the situation that exists when the amount of insurance a homeowner has on a property is no longer sufficient to pay the costs of a claim that arises on that property. The impact of inflation means that the value of the insurance cover is worth less in real terms than would have been the case some years ago.

Underinsurance Examples

Your home is insured for €300,000 but the full cost to rebuild the property is €400,000. This means that the home is underinsured by €100,000 or 25%. As a result, your claim would be reduced by 25%.

Example 1 - Partial Loss Claim

Partial damage occurs to the home and the cost to repair the damage is €100,000.
A deduction of 25% (€25,000) is made from the cost of repairs.
Therefore, the most you will receive is a payment of €75,000. You would need to fund the balance of €25,000 yourself.

Example 2 - Total Loss Claim

Damage occurs to the home, and it requires a complete rebuild.
As the home has been insured for €300,000 this is the maximum payment that can be made.
You would need to fund the balance of €100,000 yourself.

Please note: other settlement factors such as the policy excess are not considered in the examples above.