House Insurance - reduced Value - now Mortgage company wants it increased

MaxCharlie

I re-insured my house insurance to a value of €150,000 ( i moved insurance companies) and the insurance company advised my Mortgage company of the cover on the property. now the Mortgage company have advised me that they request the cover to be changed back to the original value on the property when we bought it - €360,000 in 2007

i remember vague a series on TV3 where Eddie Hobbs was discussing this matter and saying that mortgage companies were incorrect by trying this - but at the time i didn't pay attention - because i didn't think it affect me - i thought wrong - what should i do or does anyone know where i can find out about this ?

ANXIOUS

There are a few things you can do, you can get a new valuation or you can write a letter into the mortgage company outlining that you know that you are under insuring your house and will be fully liable if anything happens.

oldyouth

Firstly, Mortgage providers know NOTHING about insurance. However, property valuations and reinstatement (rebuild & remove debris) are not related. The accurate position is that reinstatement costs have fallen but mortgage providers don't care and will insist on maintaining a high valuation

ANXIOUS

oldyouth wrote: »

Firstly, Mortgage providers know NOTHING about insurance. However, property valuations and reinstatement (rebuild & remove debris) are not related. The accurate position is that reinstatement costs have fallen but mortgage providers don't care and will insist on maintaining a high valuation

Valuations will include a re-instatement value. That is what the house should be insured for.

oldyouth

ANXIOUS wrote: »

Valuations will include a re-instatement value. That is what the house should be insured for.

But my point is that valuation and reinstatement value are two entirely different figures. It is my experience that mortgage providers will often insist on seeing market value as a reinstatement sum insured and these figures are not related in any way

Stugots

EBS periodically send out a leaflet from the Society of Chartered Surveyors to allow you to calculate the appropriate reinstatement cost. The leaflet is available online here:

http://www.scs.ie/2010-SCS-House-Rebuilding-Insurance-Guide.pdf

EBS have always accepted adjustments to valuations based on this leaflet in my experience.

homer911

I would have thought the value of the outstanding mortgage played a part in this as well

Stugots

homer911 wrote: »

I would have thought the value of the outstanding mortgage played a part in this as well

I don't think so. If your house is burnt down, the insurance company will not pay out more than it costs to reinstate it.

oldyouth

homer911 wrote: »

I would have thought the value of the outstanding mortgage played a part in this as well

It doesn't play any part whatsoever. Unfortunately, someone needs to explain that to mortgage providers. They have my heart broken on this subject and all you will ever get out of them is 'it is a requirement of the mortgage'

Rabidlamb

oldyouth wrote: »

It doesn't play any part whatsoever. Unfortunately, someone needs to explain that to mortgage providers. They have my heart broken on this subject and all you will ever get out of them is 'it is a requirement of the mortgage'

Surely the rebuilding cost has nothing to do with the original value of the property.
Let them know you're using the Chartered Surveyors of Irelands own figures.
You cant burn down site FFS.

oldyouth

Rabidlamb wrote: »

Surely the rebuilding cost has nothing to do with the original value of the property.
Let them know you're using the Chartered Surveyors of Irelands own figures.
You cant burn down site FFS.

That's my point

factnee

Just following up on this as Im in a similar situation. What can the bank actually do if your insurance cover doesent match what's outstanding on the mortgage? They can't take back the mortgage surely?

Stugots

factnee wrote: »

Just following up on this as Im in a similar situation. What can the bank actually do if your insurance cover doesent match what's outstanding on the mortgage? They can't take back the mortgage surely?

It's generally part of the terms of your mortgage that you must have 'adequate' insurance in place. If they do not consider your insurance to be adequate, they can and will take out a policy with their preferrred provider and add the payment to your monthly mortgage payment.

However, I believe (and stand to be corrected) that the 'adequate' insurance is to cover the rebuild cost only and is not related to the principal outstanding on the mortgage. Certainly it works this way if the amount outstanding is less than the rebuild cost.

I've found my bank (EBS) to be quite reasonable on this to date. They've accepted rebuild cost adjustments based on the Society of Chartered Surveyors guide for estiamtes without any difficulty. The savings on insurance costs as a result have been significant.

oldyouth

They shoould go by the SCS Guide alright. However, if you have an o/s mortgage balance of eg €200k but the rebuild cost is only €150k, they won't let you reduce your sum insured. Pretty pointless of them, though as the max you can ever get in a claim is the reinstatement cost regardless of what you insure it for.

phormium

The bank is going on the original reinstatement value on the valuation that was done when you bought the house. They are unlikely to let you reduce it unless you get a new rebuild valuation done, they should because it is obvious prices have dropped but they would have to check the valuation and work out based on the area of the house what the new rebuild value would be and the bank really arent going to do that. So they will probably insist you get a new valuation done, might be worth your while if the difference in premium is large. Amount of loan or market value of house has nothing to do with the sum insured for rebuilding purposes.