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What happens if you are underinsured?

When you are looking into insurance, you will often come across stories of people being double insured. It is not only double insurance that you should pay attention to. You also need to make sure that you are not underinsured. If you are underinsured, you will never be paid the full amount in the event of a claim.

risk of underinsurance

Preventing underinsurance

If you are underinsured, it means that the amount you are insured for is too low. The damage is paid pro rata. The amount of compensation depends on the insured amount in relation to the reinstatement value of the house.

Suppose you have a 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 only receive 50% of the damage amount, regardless of the damage amount. Read more about the risk of underinsurancehere .

You can prevent underinsurance of your building by accurately determining the reinstatement value. If you look into property insurance, you will often come across the term 'reinstatement value meter'.

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Rebuild value meter

The reinstatement value is the amount of money needed to rebuild your home, in the same place and manner. The reinstatement value of a home is generally a lot lower than the price at which the home was purchased. This is due to the fact that the sales value also takes into account the location and the land the house was built on. Because the location and the land are not lost in a fire, you do not need to insure them and they do not count towards the reinstatement value. Therefore, the reinstatement value is often lower than the sales value.

A rebuilding value meter can help you to easily calculate the rebuilding value of your building. To determine what it costs to rebuild your house after it has been lost due to damage, the rebuilding value meter can be used.

The foundation of the house is not included in this. If the foundation is damaged, a new foundation will have to be made when the house is rebuilt. With most building insurance policies you can have the foundation insured, for a certain extra premium.

An insurer will ask you to fill in the reinstatement value meter every 5 years in order to maintain the guarantee against underinsurance. If you move house, you will also be asked to do so.

Contents underinsured

As with building insurance, your household contents may also be underinsured.

The household value meter can help you to easily calculate the value of your household effects. It is really meant as an aid. The property value meter is based on various studies into the value of the contents of a large number of households in the Netherlands. If you use the contents value meter you can prevent under-insurance of the contents. Insurers often offer a guarantee against underinsurance. However, this often has a maximum amount. If you are certain that your household contents are worth more than the amount indicated by the contents value meter, it is important that you indicate this.

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