Mortgage/Insurance question

N

New-Red

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Hi, looking for advice please. [broken link removed]

Well over a year ago we purchased our home for around 200k.
We took a mortgage of 106k with BOI.
There is 103k outstanding, soon we'll be paying off a lump sum of 35k.

The auctioneer valuing the house put down a rebuild cost of 225k despite my uncle who's a retired builder saying a more accurate rebuild cost would be 180k, we had to initially insure the house for 225k to appease the bank as it was faster than getting another valuer etc... in order to draw down mortgage. (we were in a hurry as we had twins on the way so it was just faster etc)

A month later I rang BOI Home insurance and decreased the cover to 200k to get premium down a bit and also coz it was a more realistic figure, and they said fine.

A year passed and no problem whatsoever.

Then after a year we got a letter from BOI Home insurance doubling our premium for the same amount of 200k cover despite no claims or changes.

So we changed insurer to Chill for the same amount of 200k and all was fine for a few months.

But now the bank are saying the home is under insured and want it changed to 225k.

That's more than house is worth, more than it would cost to rebuild, more than double the amount we owe (soon to be 300% of what we owe) and most annoyingly of all it didn't bother then that it was insured for 200k for the past 11 months when the insurance was with them.

My question is for the sake of the bank's paper work all matching up, are they realistically likely to take any action over the 25k discrepancy?

Thanks in advance.
 
I think you are better off solving such a small problem rather than hoping that the bank won't take any action.
It's unlikely, but it could affect BoI's attitude to you if you take out a loan in the future.

The SCSI has a house rebuilding index. Find out how much they say it would cost to rebuild and argue the case with BoI.

If anything goes wrong, and you are underinsured, it will cost you.

Brendan
 
Not much but what would concern me more is what is the actual re-building cost. If anything happened and you were found to be under insured by the insurance company then it is a big deal regarding what they will pay out.

What the house is worth to sell or what is owing is irrelevant to the insurance value. As mentioned go by the SCSI (although I find them totally inaccurate for my area) or get a valuation for insurance purposes.
 
If you don't prove to the bank that the rebuild cost is sufficient or increase it to the 225k that they want you to have covered the bank could put you on their own group block insurance policy and add the premium to your mortgage payments, whether they would do it for the difference in value or the whole lot I am not sure, but I suspect the latter.
 
Just on that point about the group block insurance, would that not mean that the house was then insured twice? (once by me and once by BOI), I thought that it was illegal to insure the same property twice?

I think I'll get it professionally valued anyway, but just hypothetically speaking I'm curious about how it all works.

For the sake of the 25k in the difference I wouldn't have thought the bank would act but I'm a total novice at this type of thing anyway so I'm probably wrong.

A builder already told me it can be rebuilt for 180 so I was content with that but he's retired so i can't get anything official from him to show the bank.
 
I don't think banks do the block insurance thing anymore but I could be wrong. It's not illegal to insure it twice but if something happens both don't pay out, you can only get one payout on house insurance.

I know my house could be rebuilt for less than the SCSI guidelines and they don't have a specific one for my area so I have to pick the nearest which is just not accurate but that is what my house insurer goes by. Other alternative is to get it valued for insurance purposes by a valuer.

If you had no mortgage then you could pick whatever figure you liked for insurance value or none at all, however then obviously if something happened you would be under insured so that if you only insured your house for half the value you would only receive half the amount of the claim as you would be considered to have accepted half the risk yourself by not insuring for the full amount.

(I am assuming the average clause still exists in house insurance? I haven't sold it in a while so someone more up to date might confirm)
 
New-Red said:
Just on that point about the group block insurance, would that not mean that the house was then insured twice? (once by me and once by BOI), I thought that it was illegal to insure the same property twice?

I think I'll get it professionally valued anyway, but just hypothetically speaking I'm curious about how it all works.

For the sake of the 25k in the difference I wouldn't have thought the bank would act but I'm a total novice at this type of thing anyway so I'm probably wrong.

A builder already told me it can be rebuilt for 180 so I was content with that but he's retired so i can't get anything official from him to show the bank.
Click to expand...

Its going to cost you more to get someone to value it than to just increase your cover by 25k. No offence but is your retired relation thinking 180 is what it would cost him with cheap labour and older rebuild rates etc?
 
No offence taken, his exact words were "you'd get someone to rebuild that for 180 ish". But the estate agent/auctioneer put it down as 225. So i went with 200.

Good point about the cost of the valuer versus bumping up premium to 225 alright.
 
Did that rebuild cost take into account clearing of site etc? I doubt it, you probably might rebuild for that but then again you might not, best to go with a more accurate valuation at least that way you are covered so if it was me I'd go with original valuer's figure unless there has been some massive change in your area or you have upgraded house a lot in which case it should be higher.
 
Yeah I reckon i will, it will get the bank off my back and peace of mind too. Cheers everyone for the advice :)
 
New-Red said:
A builder already told me it can be rebuilt for 180 so I was content with that but he's retired so i can't get anything official from him to show the bank.
Click to expand...

That's it exactly. A builder told you it would cost €180k. An auctioneer put it in writing that it would cost €225k. Which one do you think the bank will go with?

If you are underinsured, the insurance company will only pay out a proportion of the amount of cover you have in place, they will not pay out the full €200k.

You are also technically in breach of your mortgage contract which says your home will be insured for €225k. Although unlikely, the bank can demand that you repay the mortgage in full due to breach of contract.

How much have you saved by reducing your cover by €25k? I can't imagine it was that much and probably not worth the time and hassle it has caused you since...


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
 
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