Are your insurance policies current?
Underinsurance is one of the most common scenarios where an insurance company reduces the payout of an insurance claim. This occurs when the agreed insured amount is lower than the actual current insurable value of the property.
Are your insurance policies current?
The Civil Code states that "If, at the time of an insured event, the insured amount is lower than the insurable value of the insured property, the insurer shall reduce the insurance payout in the same proportion as the insured amount bears to the actual insurable value of the insured property."
A typical case is underinsurance of real estate. A client had a production hall insured several years ago for an amount corresponding to the prices at that time. However, due to inflation, they did not update the insurance for several years. Subsequently, after an accident where a part of the hall needed to be completely rebuilt, the insurance company discovered underinsurance. Due to the increase in prices of building materials and construction work itself, the current cost for the client to rebuild that part of the hall is several times higher than years ago when they arranged the insurance. The price increase was more than 50%.
The problem of underinsurance is most widespread in the area of real estate, especially family homes, production halls, etc., where the insured amount is usually not updated for several years. Underinsurance can be eliminated by correctly determining the insured amount of the property and regularly updating the insurance policy. Many insurance companies offer coverage up to a limit instead of a specific insured amount. In practice, this means that even if the replacement cost is higher than the insurance payout limit, underinsurance does not apply, and the amount up to the limit is paid out.
Don't be caught off guard. Regularly update your insurance policies and have the value of the property you are insuring checked. Its value can change significantly with inflation. If you are unsure whether everything is set up correctly, do not hesitate to consult us regarding underinsurance. We are Eurovalley – the best insurance solution or nothing.
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