What causes underinsurance?
There are multiple reasons why your home could be underinsured, so it’s important to keep your insurance cover up to date to avoid common gaps.
Ignoring rising rebuild costs
Your rebuild cost isn’t just the price of construction. It also factors in demolition, debris removal, local authority fees, professional fees, and replacing all fixtures and fittings in your home and outbuildings.
Undeclared home upgrades
Any extensions, renovations, or upgrades made during your policy period will impact your rebuild value. It’s best practice to contact your insurer when you complete home improvements.
Outdated property valuations
It’s the rebuild cost, not the market value, that matters. Ensure you include fixed elements such as kitchens, bathroom fixtures, built-in wardrobes, conservatories, and garages in your buildings insurance.
Underestimating contents value
Accurate valuation is essential for financial protection. Work out an accurate contents figure by taking inventory of everything removable, from electronics to clothing. Always consider the current replacement cost – not the original purchase price.
Key insight: Research from Aviva published in June 2026 found that just 17% of those surveyed know their home’s rebuild cost, and 49% said they find it difficult to estimate the value of their contents.
Check your home insurance cover today
Make sure you’re not underinsuring your property. Compare home insurance options from multiple providers today.
What happens if you underinsure your home?
You should try to avoid underinsuring your home or contents as it could leave you without sufficient cover if you have to make a claim. Among the negative consequences of underinsurance are:
Reduced claim payouts: Most home insurance policies include an ‘average clause’ that reduces your payout proportionally if your home is underinsured. If your home is only 50% insured, then you will receive 50% of any claim amount. This is included to discourage homeowners from deliberately underinsuring to save on premiums. See our compensation guide for more information on how insurers calculate claim payouts.
Financial strain: Underinsuring your home can turn a stressful event into a serious financial burden. Your home insurance policy should cover the rebuild costs of your home, but when the sum insured does not adequately cover the rebuild costs, it puts the homeowner under pressure to fund the remaining costs themselves.
Difficulty rebuilding your home: The payout you receive will be limited to the sums insured, irrespective of what it actually costs to rebuild your home. If that figure hasn’t kept pace with rising construction costs, you may find yourself unable to fully restore your home as you intended.
Be aware: If you’re deliberately or recklessly underinsured, your insurer may cancel your policy altogether, leaving you to fund the claim yourself.
How do insurers calculate a payout?
Insurers typically use the following underinsurance formula to calculate the amount they will pay out:
Sum insured ÷ replacement cost × loss amount = claim settlement
How you can measure underinsurance
If your home’s rebuild cost is €400,000, but it’s insured to the value of €200,000, then you only have 50% cover.
In the event of a partial claim of €20,000: Only €10,000 would be paid out (50%) and the balance would be left for you to pay.
In the event of a total loss of €400,000: Regardless of the actual rebuild cost, no more than the maximum sum insured would be paid out. If you try to claim damages of €400,000, your insurer would pay just €200,000, leaving you to cover the remainder yourself.
How to avoid underinsuring your home
By using tools like our Irish property rebuild cost calculator, you can get an estimate of your home’s value and rebuild cost.
It’s best to go room by room through your home and list everything of value to ensure adequate contents cover. If you have a valuable collection of artwork, antiques or expensive jewellery, it could be wise to hire a professional appraiser to assess the value of the contents in your home.
Rebuild costs and contents values are always changing, so be sure to check yours every year. Your insurer can help you work out any adjustments so your cover matches your home’s most up-to-date value.
Check your home insurance cover today
Make sure you’re not underinsuring your property. Compare home insurance options from multiple providers today.
Select your product
Simply select the insurance product you need a quote for e.g. life, home or health insurance.
Online quote form
Fill out one of our simple online assessments with your insurance details quickly and easily.
Free quote consultation
A qualified financial advisor will call you back soon for your free insurance quotation.
Frequently asked questions
Underinsurance is when your property or contents are not adequately covered, making you responsible for any shortfall in the event that damage occurs.
Overinsurance occurs when your property or contents are insured for more than their actual value, leaving you paying more for your premium to no additional benefit, as your provider will only pay relative to the cost of a rebuild or repair.
Yes, the market value is the price your home would sell for. The rebuild cost is what it would cost to reconstruct it from scratch if a total loss occurred. Your home insurance premium is based on the rebuild cost.
Get a home insurance quote
Compare insurance plans from top providers and save even more today, hassle-free and fast.
Trusted by 10,000+ Users
