PEOPLE making claims on their insurance policies are discovering that they do not have enough cover in place to meet the full cost of the losses.

Research by Aviva Insurance shows that almost one in five householders are under insured when they make a claim.

Consumers have not taken account of surging costs which means they need to insurance their homes and their contents for more money.

The Central Bank has ordered home insurers to write to their customers to warn them that their insurance cover may be inadequate in the event of a claim.

Aviva-commissioned research shows that four in 10 homeowners have received a letter from their insurer warning that the sum insured on their property may be insufficient.

This is due to the rising costs of rebuilding a home.

The Society of Chartered Surveyors In Ireland recently found the cost of rebuilding a home has shot up by between 15pc and 44pc.

But only 6pc of those who got a letter from their insurer telling them they are under-insured have increased their sum insured to the correct rebuilding cost, according to iReach research commissioned by Aviva.

All home insurance policyholders are due to receive this letter warning about cover levels.

Aviva urged homeowners to review the rebuilding costs on their home insurance policy as these costs have increased substantially over the last six months.

The company warned homeowners that they are at risk of being under-insured in the unfortunate event of a claim.

The insurer said that it is increasingly seeing evidence that the sums insured are inadequate when dealing with customer claims.

Aviva said it had seen evidence of under-insurance in around 16pc of the claims it has received recently.

Billy Shannon of Aviva said “We have written to all our home insurance customers encouraging them to review their sums insured so that they have the correct cover in place.

“However, the response level from customers to date has been low. From a claims’ perspective, we are seeing evidence of under insurance in around 16pc of claims received to date and we expect that this figure will continue to rise unless action is taken.”

He said customers who are under-insured and who make a claim under their policy may not be fully protected and may not receive the full amount necessary to rebuild or repair their home.

For example, if a home is insured for €300,000 and the current rebuild costs of the property is €400,000, meaning that it is under-insured by €100,000, or 25pc.

Mr Shannon said that if a claim occurs where the damage is estimated to be valued at €100,000 because the property is underinsured by 25pc the insured will only receive €75,000.

The homeowner will then have to supplement the shortfall if they wish to restore the property to its original specification.

Aviva recommended that customers use the Society of Chartered Surveyors In Ireland’s house rebuild calculator that is available on its website to satisfy themselves that they are fully covered.

Home insurance customers may increase their cover at any time and do not have to wait for their insurance renewal date to do so, the firm said.