HOMEOWNERS are losing out on millions of euro worth of insurance claims because they under-insure their houses.

Property owners who scrimp on insurance are left liable for huge proportions of the cost of repair work if they property is damaged. A leading loss assessor has worked out that owners are losing more than €7m a year in claims settlements due to under-insurance.

Manicle Property Claims says some households are deliberately under-valuing their property to save money on premiums.

But they risk being thousands of euro out of pocket if they are unlucky enough to have to make a claim on their insurance due to a fire, a burglary, flood or other mishap.

Loss assessor Sean Manicle said: “We have found in our dealings with homeowners that up to one in five people are under-insuring their home.”

Many people mistakenly insure their house for its market value. Mr Manicle said the property should be insured for what it costs to demolish it and rebuild it, including the removal of debris and professional fees such as the cost of engaging an architect or an engineer.

Another reason for under-insuring was to save money, Mr Manicle, of Kilkenny-based Manicle Property Claims, said.

“Some property owners are deliberately under-insuring their property believing they will save on premiums. However, in reality the savings are often minimal but the serious financial consequences are a lot more severe than envisaged.”

The insurance claims specialist worked out that property owners nationally lost out on more than €7m in 2013, the last year for which figures on claims values have been published by Insurance Ireland.

The number of residential mortgage accounts in arrears continued to drop in the final three months of last year, the sixth successive quarterly decline, according to new figures from the Central Bank.

The data show a total of 110,366 residential mortgage accounts – equivalent to 14.5 per cent of all such mortgages – were in arrears at the end of the year, down 6.4 per cent on the previous quarter.

Early arrears declined significantly during the fourth quarter, falling 3.8 per cent to 31,667 at the end of December, or 4.2 per cent of the total stock.

Accounts in arrears over 90 days – equivalent to 10.4 per cent of all residential mortgage accounts – fell by 7.4 percent from October to December to 78,699.

However, accounts in arrears for over 720 days continued to rise albeit at the lowest rate to date. According to the figures, the number of accounts in arrears for more than 720 days increased by 294 in the final quarter of 2014.

The outstanding balance on mortgage accounts in arrears for 720 days or more was €8.2 billion, the figures show.

Buy-to-let mortgage accounts in arrears over 90 days decreased by 7.6 per cent during the fourth quarter; the largest decrease recorded in this category to date. At the end of December, there were 15,386 Buy-to-let accounts in arrears over 720 days, with an outstanding balance of €4.8 billion.

A Government plan to introduce a mortgage insurance scheme to protect banks and allow home buyers to borrow more appears to have been shelved.

Yesterday Mr Noonan said such a scheme could have “a contributory role” to play in delivering an affordable and sustainable housing market, but said the Central Bank’s new mortgage caps are designed to achieve that objective.

The plan would see the Government or private insurers guarantee parts of some mortgages.

In May, Mr Noonan said he thought a temporary scheme for first-time buyers purchasing new houses would be a good idea, and that the Government was hoping to include it in the last Finance Bill.

The Central Bank has warned against introducing mortgage insurance, which would shift risk from banks to insurers.

“From a macro-prudential perspective, mortgage insurance does not remove the risk of a systemic crisis, but shifts this risk from the lenders to the insurers. If this risk is concentrated in a small number of mortgage insurers, or in a State-owned insurer, this could increase the systemic problems in the underlying market,” senior economist Niamh Hallissey wrote.

“This is particularly the case where the insurers are domestic, and the risk and accompanying liability remains within the State.”

The Oireachtas Finance Committee has been examining whether mortgage insurance should be introduced here. Industry experts told the Committee that they were concerned the price of the insurance would be passed on to consumers.