What does being over-insured mean?

When it comes to household insurance it is possible to be under-insured or, on the contrary, to be over-insured.

Either way, the insuree must rectify the situation in order to avoid problems down the road, which, in some cases, can have serious consequences. 

The risk of being over-insured

When you wish to take out a household insurance, you are required to provide the said insurance with the sum of all the items in your home: this is called the household inventory. 

The inventory established must be precise enough so that you are not over-insured, which will lead to you paying premiums for nothing. Indeed, in the event of damage, the insurance will reimburse, at most, the replacement value of the relevant items. 

In other words, paying more than what is necessary does not improve your insurance’s services in any way. 

Let’s use an example: one evening, when Zoé and I were at a festival, the bathtub tap was not closed properly and the bathtub started to overflow while we were away. When we got back, a big part of our bedroom and living room were flooded and several of objects were damaged. We immediately contacted the insurance, which sent an expert. He came over and assessed the damage: 50,000 CHF. 

Value indicated in the household insurance policy: 120,000 CHF

  • Flood damage: 50,000 CHF
  • Our actual damage: 70,000 CHF

They will refund, at most, the actual damage = 50,000 CHF. Even though we paid premiums on 120,000 CHF. 

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

In conclusion, being over-insured is not dangerous in itself. It simply represents a loss. 

You will be paying a high premium, which will not protect you any better than if you had paid a fair price (40).

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