What happens if you are underinsured?
When you are looking into insurance, you will often come across stories of people who turn out to be double insured. Not only double insurance is something you should pay close attention to. You should also be careful not to be underinsured. This is because if you are underinsured, you will never be paid the full amount in the event of a claim.
Preventing underinsurance
If you are underinsured, it means that the amount you are insured for is too low. The damage will be paid pro rata. The amount of compensation depends on the insured amount compared to the rebuilding value of the house.
Suppose you have building insurance for €150,000 and the reinstatement value is €300,000, then you are insured for 50% of the reinstatement value. In case of damage, you will therefore only be compensated for 50% of the damage amount, regardless of the damage amount. Read more about the risk of underinsurance here .
You can avoid underinsuring your building by accurately determining its reinstatement value. If you start looking into building insurance, you will frequently come across the term "reinstatement value meter.
Reconstruction Value Meter
The rebuild value is the amount needed to rebuild your home, in the same place and manner. The rebuild value of a home is generally a lot lower than the price the home was purchased for. This is due to the fact that the resale value also takes into account the location and land the house was built on. Because the site and land are not lost in a fire, you do not need to insure them and they do not count toward the rebuild value. As a result, the rebuild value is often lower than the resale value.
A rebuilding value meter can help you calculate the rebuilding value of your building in an easy way. To determine what it will cost to rebuild your home after it has been lost due to damage, the rebuild value meter can be used.
This does not include the foundation of the house. Should the foundation become damaged, a new foundation will have to be made when rebuilding the house. Most building insurance policies allow you to insure the foundation for a certain additional premium.
An insurer will ask you to fill out the rebuild value meter every 5 years to maintain the guarantee against underinsurance. If you move, you will also be asked this.
Contents underinsured
As with home insurance, your contents may also be underinsured.
The contents value meter can help you easily calculate the value of your contents. It is really meant as a tool. The Inboedelwaardemeter is based on various studies into the value of the contents of a large number of households in the Netherlands. If you use the Inboedelwaardemeter you can prevent underinsurance of your household contents. Insurers often offer a guarantee against underinsurance. However, this often has a maximum up to a certain amount. If you are sure that your household contents are worth more than the amount that comes out of the household contents value meter, it is important that you indicate this.
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