The sums insured on your policy is the figure your insurer uses to settle a claim. Get it wrong and an otherwise valid claim can be reduced by 30% or more under the average clause. We see it every week. Here is what sums insured actually means, how to set the figure properly, and what happens if it is too low when you claim.
What sums insured actually mean
Two figures sit on most home and commercial policies: buildings sums insured (the cost of rebuilding the property from scratch) and contents sums insured (the cost of replacing everything inside). Neither figure is the market value of your property. Buildings sums insured is a rebuild cost, including labour, materials, professional fees, debris removal, and compliance with current building regulations. Contents sums insured is the new-for-old replacement cost of your possessions.
Both figures should be checked annually. Materials inflation alone has pushed Irish rebuild costs up by 35% to 50% over the past five years. A figure set in 2019 that has not been reviewed is almost certainly understated.
How insurers use sums insured at claim time
When a claim is made, the insurer compares the sums insured to what the rebuild or replacement actually costs. If the sums insured are accurate, the claim settles at the documented loss value. If the sums insured are understated, the insurer applies the average clause and reduces the settlement proportionally.
This catches policyholders out most often after extensions, refurbishments, kitchen upgrades, or significant contents purchases that were never reflected in the policy schedule. The first they hear about it is when an underpaid settlement arrives.
Setting buildings sums insured properly
The Society of Chartered Surveyors Ireland (SCSI) publishes an annual Rebuild Cost Calculator that gives a per-square-metre rebuild figure by region. It is the simplest starting point for a domestic property. For larger or unusual properties, a chartered quantity surveyor can produce a Reinstatement Cost Assessment (RCA) tailored to your building.
Things to factor in:
- Floor area, all storeys, including converted attics and integral garages
- Construction type (block, brick, timber frame, traditional cut stone)
- Roof type (slate, tile, flat, complex)
- Outbuildings, walls, and hard landscaping
- Professional fees (architect, engineer, surveyor)
- Demolition and debris removal
- Compliance with current building regulations during reinstatement
Setting contents sums insured properly
The standard exercise is the room-by-room walkthrough. Open every cupboard, every wardrobe, every drawer. Most homeowners, when they actually do this, end up with a figure 30% to 50% higher than they assumed. Soft furnishings, kitchen utensils, books, paperwork, sports equipment, garden tools all add up.
Special items typically have separate sub-limits: jewellery, fine art, audio-visual equipment, bicycles. Read the policy schedule for the per-item caps and add specified-item cover where the cap is too low.
When to call a loss assessor
If a claim has already been made and the insurer is applying the average clause, do not accept the reduced offer until you have had it reviewed. Average-clause reductions are sometimes correctly applied and sometimes not; the basis for the reduction can be challenged. Our team handles underpaid settlement claims every week.
Annual review, then forget it
Sums insured is the kind of detail that costs nothing to get right and a lot to get wrong. Five minutes a year, an SCSI rebuild calculator, and a contents walkthrough is the entire process. If you would like a second pair of eyes on your sums insured before you renew, our team offers a free policy review as part of our service.
Written by the team at N.J. Carroll & Associates, insurance loss assessors and quantity surveyors, established 1988.
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