Property Underinsurance: A Growing Risk for Czech Households
According to current data, over 65% of insured properties in the Czech Republic are underinsured, meaning that the insured amounts do not reflect the true value of the assets. This situation is alarming because, in the event of an insured incident, it can lead to significant financial loss for the property owner. The main cause of underinsurance is the significant increase in property and construction material prices in recent years. Many homeowners and apartment owners have not updated their insurance policies, which means that the insured amounts set several years ago no longer correspond to current market prices.
Causes of Underinsurance
The main cause of underinsurance is the significant increase in property and construction material prices in recent years. Many homeowners and apartment owners have not updated their insurance policies, which means that the insured amounts set several years ago no longer correspond to current market prices. For example, a family from the Olomouc region, who built a house in 2018 for 9 million Czech crowns and insured it for the same amount, faced flood damage in 2024. The repair cost 3 million Czech crowns, but due to underinsurance, the insurance company paid out only 2.25 million, meaning the family had to pay an additional 750 thousand Czech crowns from their own funds.
Consequences for Policyholders
Underinsurance can have serious consequences for policyholders. In the event of an insured incident, such as a fire, flood, or other damage, the insurance company will only pay a proportional part of the damage corresponding to the ratio of the insured amount to the real value of the property. This means that the insured must cover the remaining costs of repair or restoration of the property from their own funds.
Recommendations for Property Owners
To avoid the risk of underinsurance, property owners are advised to regularly update their insurance policies and adjust the insured amounts to current market prices of properties and construction materials. It is also advisable to consult insurance policies with experts and consider the option of automatic indexation of insured amounts, which accounts for inflation and price growth.
Property underinsurance represents a significant problem in the Czech insurance market in 2025. Property owners should pay increased attention to updating their insurance policies to ensure adequate protection of their assets and minimize financial risks associated with potential damages.
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