House and contents insurance is a particularly important investment for your peace of mind in case something unexpected happens such as theft, burglary, flood, earthquake, breakdown or other damage. But before you get into the process of insuring your home (and/or its contents), it’s good to know a few basic things so you can be be prepared.
INSURED VALUE
The insured value is essentially the cost that must be spent on the reconstruction of the house in the event of a disaster. Therefore, compensation in case of damage is calculated based on this amount.
HOW IS THE INSURED VALUE CALCULATED?
The insured value of a house is determined through an agreement between the owner and the insurance company. In order to calculate the value, the insurer usually asks some questions about the construction of the house, i.e. about the materials used for the walls and roof, about the existence or not of arbitrary spaces, etc.
In some cases, however, for many insurance companies, it is sufficient to calculate the minimum value based on the area of the property which is then multiplied by the estimated reconstruction value. This is common in properties that do not have peculiarities. Another element that affects the cost of reconstruction is the cost of building materials. The cost of these materials changes, so the cost of reconstruction per square meter is frequently adjusted.
THE RISK OF UNDERINSURANCE
It is very important to note that the house and contents insurance has bto be done at its real value and not less, because there is the possibility of underinsurance and in case of any damage you will not be compensated with the amount you should. If you have insured your hpuse and contents lower than their real value, then the compensation will be proportional to the value you have declared and not to their real value.
For example: If in an apartment with an area of 100 sq.m. the actual reconstruction value is 1000 euros per sq.m., but the insured value has been declared at 50.000 euros, then in case of damage you will be compensated with 500 euros per sq.m.
CONTENT INSURANCE
The house is not just the building and the four walls. It is also the content it contains. And these items are important to be insured, so that you can be compensated and the items can easily be replaced or repaired in case of damage, natural disaster or theft.
There are also some things you should pay attention to in contents insurance.
ACQUISITION COST AND VALUE OF ITEMS
In case of theft or destruction, you must prove the value of the items you are insuring to get the right compensation. This comes with several challenges. Have you kept receipts of all the items in your house so you can prove the cost they had when you bought them? Probably not.
Also, the value of some items changes as time goes by. If an appliance or piece of furniture was bought many years ago, it certainly doesn’t have the same value now.
COMPENSATORY THEORY
In such cases you should know the rule of the compensatory principle. This means that insurance reflects the current condition of an item and cannot put you better off with compensation. Therefore, the age of the objects is definitely taken into account.
To find out more about house insurance click here.
To find out more about contents insurance click here