Guarantee against underinsurance

What is underinsurance?

Underinsurance means that you have insured something (such as your home, boat, or personal property) for an amount that is too low under your home insurance and personal property insurance policies, for example. If damage occurs, you will only be reimbursed for a portion of the damage amount because the insured value is lower than the actual value.

You may find yourself underinsured as your circumstances change. You might move in with a partner, renovate your home, or buy more and more (expensive) items. The insurance policy you previously purchased may no longer be sufficient.

Avoid being underinsured

You can prevent this by regularly checking the current value—for example, through an appraisal or a value assessment tool. Some insurance policies also offer protection against underinsurance, so you’re always fully covered.

Sample Calculation of Underinsurance in Homeowners Insurance

In the event of underinsurance, the amount of the loss is calculated using the underinsurance formula, in which the insured amount stated in the policy is divided by the actual value of the building.

Suppose you have home insurance coverage of €150,000. However, the replacement cost is €300,000. In that case, you are insured for only 50% of the replacement cost. If you file a claim, you will only be reimbursed 50% of the amount of the loss—regardless of the total amount of the loss.

Reconstruction Value Meter

Every 5 years, the insurer asks you to fill out the replacement cost calculator to prevent underinsurance. You’ll also be asked to do this if you move. A replacement cost calculator makes it easy to calculate the replacement cost of your home. This tool determines the cost of rebuilding your home after damage.

Foundations don't count

The foundation of the house is not included in this calculation. If the foundation is damaged, a new foundation must be built during reconstruction. Many home insurance policies allow you to include the foundation in your coverage for an additional premium.

Adjusted Homeowners Insurance Premium

Have you filled out the replacement cost form? If so, the insurer will check whether the insured amount has changed. Your premium will then go up or down. The insurer will then send you a new policy statement with the adjusted premium.

Household Contents Valuation Tool

The household goods value calculator can help you easily estimate the value of your household goods. It is really intended as a tool. The household goods value calculator is based on various studies of the value of household goods in a large number of households in the Netherlands.

Insurers often offer coverage against underinsurance. However, this coverage is subject to a maximum amount. Are you certain that your household contents are worth more than the amount calculated by the household contents valuation tool? If so, please indicate this.

Special Assets and Warranty

With home contents insurance, the underinsurance coverage often does not apply to special items, such as valuable jewelry or art. This means that, in the event of a loss, you may have to cover part of the claim amount yourself if the insured value turns out to be too low.

Valuables Insurance

To prevent this, it’s a good idea to have a revaluation done and to make sure your valuable possessions are properly insured with a valuables insurance policy.