What does being under-insured mean?

When taking out a household insurance from an insurer, it is mandatory to share what we think the complete amount of our household items, called household inventory, is.  

Enthought calculating the value of each and every item is a tedious process, it is essential in order to make sure you are not at risk of being over-insurred or under-insured, as explained in the paragraph below. 

What does being under-insured mean? 

One year later, during the course of an afternoon dedicated to administrative tasks, we established an inventory of the items around us. As it turned out, the value of our household had increased fivefold and we were severely under-insured.  

So, we got in touch with our trusted insurer, who adjusted our policy accordingly.

And luckily so!

Had the apartment been flooded over the course of the past year, we would have risked facing a significant reduction of our insurance. 

Let’s use an example: one evening, when Zoé and I were at a festival, burglars broke into our home. They managed to have enough time to steal a big chunk of our belongings. There was not a single valuable object left in the house. We contacted our insurance to report the theft. In order to process our refund request, the insurance sent us an expert to assess the damage. He estimated that the theft cost us 60,000 CHF. He then proceeded to ask us about our insurance policy: 

  • Value indicated in the household insurance policy:40,000 CHF
  • Theft: 60,000 CHF
  • Actual household inventory: 90,000 CHF

Though the value of our belongings when we first moved in five years ago was about 40,000 CHF, today, without even realising it, it increased to 90,000 CHF. 

The insurance will thus proceed with the refund, but by adjusting it to the amount of the policy. 

40,000 / 90,000 = 44.44 %.

Insurance refund: 44.44% x 60,000 = 26,666.66 CHF

A house diagram of how the risk of underinsurance works for your household insurance

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