You don’t have to buy home insurance from your mortgage provider

A survey has shown how one homeowner could be paying €202 more a year than their neighbour for the same cover

As Ulster Bank and KBC prepare to exit the mortgage market, homeowners are being urged to shop around for home insurance.

Online insurance brokers insuremyhouse.ie has carried out a home insurance cost comparison exercise, in which it looked at the price KBC and Ulster Bank charge in comparison with what’s available in the market.

A number of house prices and locations were sampled, and the figures show that the prices quoted by these banks were more expensive in almost all cases.

“Thousands of mortgage holders with Ulster Bank and KBC also have their home insurance with that institution,” says Deirdre McCarthy of insuremyhouse.ie. “Many of these homeowners will now see their mortgages sold to another bank. This is an opportunity for them to get a better price on their policy by shopping the market rather than simply accepting a new home insurance plan from their new bank, which may well be significantly more expensive than what they could get elsewhere.”

She points out that just about every household in the country pays home insurance, and for 30, 40 or even 50 plus years. This means that savings of even €100 a year can really add up.

In carrying out the cost comparison, the broker took five typical home insurance scenarios, obtained quotes from Ulster Bank and KBC for each home and compared this with the best quote they were able to secure from the 14 insurers they deal with.

The price differences were significant.

"In more than one case, the bank quoted a premium that was 66% dearer than the lowest quote on the market.

“In monetary terms, we could see that one homeowner could be paying €202 more a year than their neighbour for the same home insurance — depending on who they take their policy out with.”

“Last year we ran a similar cost comparison and another bank, PTSB, came out as the most expensive in all scenarios we tested. It’s clear that banks are not offering the best value on these policies.”

She says that many people operate under the mistaken belief that because they’re a customer of the bank, they will get a favourable rate. Moreover, there is plenty of evidence out there to suggest that when it comes to home insurance, loyalty doesn’t count for much.

*All quotes include accidental damage and are owner occupied

A survey published by consumer specialists Which? in the UK in 2019 found that loyal customers pay up to 75% more for home insurance than new customers.

Subsequent research from Citizens Advice in the UK was even more damning. They found that after six years, loyal home insurance customers pay £325 a year on average, almost double what new customers pay (£172).

It’s also worth pointing out that there’s still quite a bit of misinformation in the marketplace.

A nationwide survey of 1,000 people commissioned by insuremyhouse.ie last year found that one in five (21%) mortgage holders believe it’s compulsory to take out home insurance and/or mortgage protection with their lender. It isn’t.

When you get a mortgage, the lender will usually insist on buildings insurance and mortgage protection.

You don’t however have to take their product.

In that same survey, over half (52%) said they bought insurance from their mortgage provider either because they thought they had to, they felt pressurised or obligated to do so, or they thought it would help with their application.

The reality however is that your mortgage application will not be impacted by where you buy your insurance. Always shop around and secure the best value you can.

House insurance is a more complicated product that car insurance; there can be considerable differences between policies in terms of what they include and don’t include. Which means it’s not a box ticking exercise. You’ve got to research what’s out there and fit it to your needs and your budget.

Home insurance generally covers damage to the building, damage to contents, loss of or damage to valuables and injury to others in your home. You can actually get separate policies to cover these four risks, but in general, you’ll get a reasonable mix of convenience and value with a single policy.

How much to insure for? The rule here is to insure your property for the cost of rebuilding it, not the market value. The Society of Chartered Surveyors has got a house rebuilding calculator on its website scsi.ie.

It’s important to get the amount just right. Under-insure and you may not have enough to repair or rebuild in the event of damage or destruction. Over-insure and you’ll end up paying extra without incurring any additional benefit in the event of a claim.

Varying policies

Policies can differ substantially between insurers so always check what’s insured and what’s not, particularly if your home is susceptible to risks like flooding or subsidence.

In general, policies will tend to cover you against damage from flood, fire, storm, vandalism, subsidence, burglary, impact and leakage of oil or water from a domestic appliance. Ordinary wear and tear is never covered.

Estimating the value of contents can require a little more work than figuring out the reinstatement cost of the building itself. Some companies have minimum amounts they cover for, and some calculate the value of contents as a fraction of the building cover.

Most stipulate an upper limit in the value of any one item; particularly valuable items should be listed separately on the policy. Photographing these items in case they get stolen is always a good idea.

You can sometimes trade off a lower premium for a higher excess, which is the first part of your claim that is not covered by the insurance company. Take care with this one though. There’s little point in specifying valuable items such as iPads and bicycles if you opted for a higher excess.

Ms McCarthy said most insurers will offer discounts for people with alarms and/or monitored alarm systems. If you have one of these, be sure to enquire whether any discounts apply.

“A monitored alarm could reduce premiums by up to 25%. While these may have been expensive a few years ago, the cost of alarm monitoring has reduced significantly so may be worth looking into.”