House Insurance issue

mobby

Anyone know if a building society can insist on you having a min amount for rebuilding on your house insurance. Mate has been told by EBS that he has to have a Min rebuild value of €350.000!! Never head of such a thing or never had a problem myself. Apparently they have told him he has to produce a certificate with this value if he changes from them

.

Paulw

I assume his building society are the mortgage holder for the property? Then, of course, they can insist that the property has a rebuild value specified. And it's not unusual for them to require proof of same.

kildub

maybe they mean they will only insure houses with a rebuild value of more than €350k, implying they don't want business from smaller/cheaper/low value properties, only high end market.

Cabaal

Why not choose another insurance company that allows you to specificy the amount?

mobby

Cabaal wrote: »

Why not choose another insurance company that allows you to specificy the amount?

That the problem,he has, but the EBS say whatever Insurance company he changes to they must have min rebuild of €350,000 and he has to produce a Cert to that effect.

smelltheglove

I dont understand exactly what you are saying, I mean most mortgage holders would be required to have insurance to the value of the house so if I bought a house for 350k my insurance should cover 350k, no point in the insurer saying they will insure the house for 250k if the bank requires insurance to the full value. Whenever I started a new mortgage that is what was required.

Paulw

mobby wrote: »

That the problem,he has, but the EBS say whatever Insurance company he changes to they must have min rebuild of €350,000 and he has to produce a Cert to that effect.

So, what is the problem? I assume his mortgage is approx 350k? No wonder they want that rebuild value insured.

IrishTonyO

smelltheglove wrote: »

I dont understand exactly what you are saying, I mean most mortgage holders would be required to have insurance to the value of the house so if I bought a house for 350k my insurance should cover 350k, no point in the insurer saying they will insure the house for 250k if the bank requires insurance to the full value. Whenever I started a new mortgage that is what was required.

Not really the rebuild cost of a house is usually a good bit cheaper than the value, as the site is including in the value and does not have to be repaid when rebuilding

axel rose

I am in the same situation. buying a house and confidently put the rebuild at 100k less than the purchase value. My bank want it at the purchase price, apparantly they changing how they do things, eg, three bed detatched are rebuilt at €xxxxx, 2 bed townhouse in tralee worth €xxxxxx.

Its not done individually apparantly..........stress on apparantly..

mobby

Paulw wrote: »

So, what is the problem? I assume his mortgage is approx 350k? No wonder they want that rebuild value insured.

The problem is you would build some house NOW for €350 grand compared to costs a number of years ago; he lives in a normal 3 bed Semi D in Dublin. I myself reduced my rebuild costs and contents last year to reflect the current market and reduced my insurance premium by over €200.

IrishTonyO

mobby wrote: »

The problem is you would build some house NOW for €350 grand compared to costs a number of years ago; he lives in a normal 3 bed Semi D in Dublin. I myself reduced my rebuild costs and contents last year to reflect the current market and reduced my insurance premium by over €200.

I did likewise and also changed providers and got my policy down from €620 to €288

sunnysoutheast

IrishTonyO wrote: »

I did likewise and also changed providers and got my policy down from €620 to €288

Make sure you revise it upwards again next year when the building boom is back

dudara

Moved to Banking & Insurance & Pensions

dudara

Agent_99

Must be a new tactic by EBS they just sent me a letter advising me that they have just set up a policy for me costing 379.67 a year.. Even thought I have a policy elsewhere and have never gotten my home insurance from them.

They will get a "polite" email tonight and a call tomorrow telling them where they can put their policy.

JodTT

Agent_99 wrote: »

Must be a new tactic by EBS they just sent me a letter advising me that they have just set up a policy for me costing 379.67 a year.. Even thought I have a policy elsewhere and have never gotten my home insurance from them.

They will get a "polite" email tonight and a call tomorrow telling them where they can put their policy.

How did you get on with this?

Just this morning I have received a letter from my mortgage company (KBC Homeloans) stating that I have under-insured my property. I recently reduced the rebuild value from €245k to €200k (a 3 bed semi, approx 98 sq m in Balbriggan). They have said that they want the rebuild value to be insured at €235k! This is totally unrealistic, since I couldn't even sell my house for this price!

The really hilarious thing is, in the letter, they state that the rebuild value of my house in 2006 (when I bought it) was €195k. I find it very hard to believe that it's gone up €40k while we're in the midst of a recession!!!!

eagle_i

Ok guys, heres the deal.
All lending institutions require building insurance to be put in place when you are taking a mortgage out and also you need to keep this cover in place throughout the life of your mortgage. You can change insurer at each renewal to find the most suitable policy for your needs. This is standard practice and a lending institution insist on having their interest noted on the household policy, therefore any claim regarding the house/building, the insurance company will notify the mortgage lender, also if you fail to renew the building insurance the insurance company must notify the lender. The effecting of a building insurance policy with the lender's note of interest on the policy is all part of the terms and conditions of your mortgage.

The lender at the outset will carry out a valuation of the property you are purchasing and part of the valuation report is the minimum insurance value. You will see this on your copy of the lender's valuation report. The lender will require you to take out a policy for the minimum building insurance value as per the valuation report and you will need to submit a Letter of Indmenity from the insurance company confirming the lender's interest is noted on the policy. If you don't comply with this you will not be able to draw down the mortgage to complete your purchase. At the end of the day the lender is simply protecting their investment. After all they lent the money to you to purchase the house and until you pay back the money in full the lender effectively owns the house, not you!

Another thing if you do not renewal or keep up a building insurance policy each year, the lender in theory can foreclose on you for not complying with the terms and conditions of your mortgage. Read your mortgage contract, it is a legal document you are signing and you are entering into an agreement for next 20/30 years of your life. I don't mean to offend but ignorance of your legal responsibilities is not a defence, ask Jim Mansfield Jr., he recently found this out to his cost. It is unlikely the lender will foreclose on you for not renewing a building insurance policy, but they can effect/take out a builiding insurance policy on your behalf and of course charge you for the previlage.

As a rule of thumb method of working out the amount of building insurance cover you need, the insurance companies have a uniform calculation for the Rebuild Cost, I know at one stage the cost for Dublin was €150 per square foot and the rest of the country was €120 per sq. Ft. Therefore if you have a house of 1,000sq.ft, the minimum building insurance you should have in place is (€150/€120 x 1,000sq.ft) €150,000/€120,000 in Dublin and the rest of the country respectively. Not sure how up to date those rebuild figures are, perhaps someone can correct me on this. Simply ask your insurer what calculation method they use to give the building insurance value.

Also a final point, building insurance is separate to your contents insurance. Almost all household policies combine the building and contents insurance in the one policy. This is for convenience purposes. The contents are your business, the lender has no right to claim an interest in the contents, their only hold is over the building itself. If you are pruchasing/living in an apartment the building insurance is part of the managemnt company block policy which you contribute through your annual management fee. The contents again in this instance are your business you will need to take out a separate policy personally for this.

I trust this answers your question.

JodTT

Hi eagle i,

Thanks for your detailed response. I do understand the reasons for a mortgage company's interest in the build insurance on my property. My issue is with the valuation of this rebuild amount. I feel that in this climate to value the rebuild of my house €40k higher than it was 4 years ago when the building industry was in the height of a boom is very unrealistic, and smacks of mortgage company's not living in the real world.

As mentioned, my house is a semi detached and 98 sq metres in North County Dublin. According to the SCS figures updated in February 2010, the rebuild cost should be €1,908 per square metre, which would indicate a rebuild cost of €186,984. If I add on a further €20,000 for quite a large shed out the back, this still leaves me far short of my mortgage company's estimated rebuild cost of €235,000!!!

I have since been onto my insurance company and they have organised to increase the rebuild value to my mortgage company's required amount, because I know I have a legal duty to do so, but I can guarantee you, if my house burned to the ground tomorrow, there isn't a chance in hell of them giving me €235,000 to rebuild it!!!!!

oldyouth

JodTT wrote: »

Hi eagle i,

Thanks for your detailed response. I do understand the reasons for a mortgage company's interest in the build insurance on my property. My issue is with the valuation of this rebuild amount. I feel that in this climate to value the rebuild of my house €40k higher than it was 4 years ago when the building industry was in the height of a boom is very unrealistic, and smacks of mortgage company's not living in the real world.

there isn't a chance in hell of them giving me €235,000 to rebuild it!!!!!

You are 100% right OP. I deal with it every day of the week. Lending institutions do not understand the difference between market value and insurance reinstatement. I've had cases where they have insisted on a mortgage applicant insuring the full market value on a plot of land. Pure nonesense but they are holding up your funds while you debate this. My experience is that they won't back down. Bite the bullet I'm afraid