What is the risk of underinsurance?
With home insurance or contents insurance, you may face underinsurance. The consequences of underinsurance are often underestimated. We explain what the risk of underinsurance is and how you can prevent it.
What is the danger of underinsurance?
By underinsurance, we mean that the amount you are insured for is too low. The actual value of your home is higher than the amount you are insured for. What is the risk of underinsurance? The moment you have a claim, you will also only receive a portion of this claim. We will illustrate this using an example:
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 the event of damage, you will therefore only be reimbursed 50% of the claim amount, regardless of the damage amount.
What if I don't fill out a new rebuilding value meter?
The moment you do not fill in your new reinstatement value meter in time, your building insurance policy remains unchanged. You remain insured. However, you run the risk of underinsurance. With underinsurance, the insurer will not pay out the full amount of the damage after, for example, a fire, burglary or leakage.
Do you have questions or need help completing the value meter? If so, please contact us. We will be happy to assist you further.
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How do I prevent underinsurance?
In order to calculate the value of your building properly, a reinstatement value meter is used. A correctly and fully completed reinstatement value meter gives you the guarantee against underinsurance for 5 years. Using a questionnaire, in combination with your family situation, income, age and the size of your house, an estimate is made of the value of the building. When you fill in this value meter completely and truthfully, your insurer will give you a guarantee against underinsurance. If, in the event of a claim, it appears that the reinstatement value meter is too low, the insurer will assume this risk. In this case, the insurer will compensate the full amount of the damage.
A rebuilding value meter must be completed again every 5 years. In the meantime, changes may happen to your home. Have you had a dormer installed, or expanded your home with a sunroom? These types of changes can be a change in value to your home. That is why it is important to redetermine the rebuilding value of your home when you make changes to the home or after 5 years.
A contents insurance policy also requires a contents value meter to be completed every 5 years to avoid the risk of underinsurance.
Property insurance premium may change
Once you have completed the rebuild value meter, the insurer will see if the insured amount differs from what is already known. This may result in an adjustment of your premium. In this case, you will receive a new policy sheet by mail from your insurer with the adjusted premium.
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