IS it worth making a claim, is a question I’m frequently asked by people when it comes to their home insurance policy.
And they ask because the nature of the claim and the financial impact it caused may not be significant, but they’re wondering nonetheless should they use their home insurance policy to cover the cost. They don’t really want to raid their savings account to cover the cost of the repairs.
What’s the point in having an insurance policy if you’re not going to use it, right?
But there is that uncertainty about the impact a claim could have on their future premiums.
And if you have that worry, it’s well founded because if you have a claims history, regardless of how big or small a past claim was, it will impact your future insurance premiums.
I wanted to find out exactly what that monetary impact would be, so I contacted a very well-known insurance provider this week and I asked them to give me some quotes based on insuring a property for €300,000, contents cover of €50,000 with a policy excess of €250 (this is where the first €250 of any claim is paid by you rather than the insurance company) I also told them I made a small claim last year for water damage from a burst pipe.
The premium they quoted me for the year was €350.47.
I asked them if I hadn’t made a claim in the last number of years, would this influence the premium they’d charge me?
And yes, they said it would.
If I had made a claim in the last 5 years my annual premium would be €439.46.
In this instance, if you made a claim within the last 3 years, your annual premium would increase by 25% and based on these numbers, it showed to me that from a financial perspective, it’s not worth making a claim for anything less than €500.
And knowing this amount is very important, because if you now know not to file a claim for less than €500, why would you have a small policy excess on your policy?
Increasing your policy excess from €250 to €500 would see your premiums reduce by 2%, and if you increased you excess to, €1,000, the reduction would be 7%.
So, if you are looking at ways of saving on your annual premium, this is a very simple and easy way to do it, without having any impact on your core cover.
And if you were to increase your policy excess from say €500 or €1,000 in order to, take advantage of lower premiums, you should set aside €1,000 of your savings and put them into a Credit Union or An Post account and that amount will cover your out of pocket expenses for anything costs incurred up to €1,000.
By doing this, four things will happen:
Your existing premiums will immediately reduce
You are preserving your no claims history
You are keeping your new lower premium protected going forward and,
You have set aside funds that can be used to cover the cost of any accidents or damages that may occur in the future.
Now let me ask you a quick question about your own home insurance policy.
And this is particularly relevant given that Storm Ellen and Francis paid us a visit in recent weeks.
How much is your house insured for and how did you arrive at the figure?
There is an excellent website from the Society of Chartered Surveyors – www.scs.ie – and when you look at this site, inside you’ll find their home rebuilding calculator which shows, what the cost of rebuilding a particular property type is throughout the country.
It will show you for example that a 3- bed semi-detached property in Dublin (typical size 95 sq. m) should be insured for €304,000. The same type property in Cork should be insured for €241,371 and €233,288 if you live in Limerick.
It’s a very useful guide and something you can compare your existing cover against. It will confirm that your insured for the right amount of perhaps you’re over or under insured, but at least now you have something to measure and compare against.
Liam Croke is MD of Harmonics Financial Ltd, based in Plassey. He can be contacted at firstname.lastname@example.org or www.harmonics.ie
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