By John Healy of Healy Insurances

The average cost of rebuilding a house in Ireland has risen by an average of 21% over the past 12 months according to the most recent rebuilding guide issued by the Society of Chartered Surveyors Ireland (SCSI).

The causes for the continuing acceleration of costs are many and new challenges such as energy costs are adding to the issues.

The construction sector has battled shortages of materials, labour shortages and overall inflation in the wider economy. The war in Ukraine and the current energy crisis are going to have consequences on the cost of materials which in turn will feed into rebuilding costs as the winter progresses.

The end result of this turmoil is a huge increase in the cost of building. From an insurance perspective this is going to have far reaching consequences.

Your property should be insured for the reinstatement cost and not the market value; in other words the cost of rebuilding the house excluding the site value. Bear in mind that currently the rebuild cost could be higher than the market value.

The base rebuilding costs in the Kerry region are running at an average of €220 to €240 a square foot - or €2,435 per square metre for a four bed detached house of 119 square metres - in the most recently published guide.

The guide is based upon estate type houses built since the 1960s. The calculation should account for the most recent building regulations, professional fees, demolition costs and VAT, and should make provision for higher than average fittings, built-in wardrobes, fences, walls, and garages.

It is very important to note that “underinsurance” can have a serious effect on any future claims settlements. Most policies include an “Average Clause” which means in the event of “underinsurance” any claims settlement can be reduced in value in proportion to the degree of underinsurance. Where the Sum Insured is only 75% of the total reinstatement cost, you will receive 75% of the agreed cost of reinstatement, whether the claim is made for partial reinstatement or total loss.

I would recommend that you review your reinstatement sum insured sooner rather than later and continue to review during the year. In order to get a definitive individual reinstatement value on your house you should contact an independent qualified surveyor.

The rebuilding cost report and a rebuilding calculator can be found at www.scsi.ie.