Did you know that almost half of all building damages can be attributed to just two causes, and an outdated policy can drastically reduce your compensation? An incorrect insurance sum is a financial risk that many property owners unknowingly carry. We'll show you how to reliably identify and proactively close coverage gaps.
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The topic briefly and concisely
Underinsurance occurs when the sum insured is lower than the actual reinstatement value, which can lead to proportionate reductions of 20% or more in the event of a claim.
Increases in value due to renovations, extensions, or market developments, as well as the adoption of outdated contracts in the case of an inheritance, are the most common causes of coverage gaps.
A regular, professional property valuation is crucial to correctly adjust the insurance sum and avoid financial losses.
Every day in Germany, almost 7,000 insured property damages occur, which in 2022 amounted to total costs of over 7.6 billion euros. Many property owners have a false sense of security, unaware that their property is underinsured. A coverage gap can particularly arise after an inheritance or modernization, leading to potentially crippling costs in the event of damage. This article explains how you can minimize financial risks through an accurate and up-to-date property valuation and ensure that your insurance coverage is 100% effective in a critical situation.
The Invisible Risk: When the Insurance Sum No Longer Matches the Property Value
Underinsurance occurs when the actual value of your property exceeds the sum specified in the insurance contract. In 2022, nearly 2.54 million such claims were settled. According to § 75 of the Insurance Contract Act (VVG), the insurer is allowed to proportionally reduce the payout if there is significant underinsurance. For instance, if your house is worth €500,000 but only insured for €400,000, then your coverage is only 80%. In the event of a claim, even a smaller one of €50,000, the insurance will only reimburse 80%, which is €40,000. You must cover the remaining €10,000 yourself. This principle highlights how an outdated policy can become a serious financial trap. The most common causes of damage, such as water leaks and storms, exacerbate this risk further.
Subtle Danger: How Coverage Gaps Develop Unnoticed Over Years
Coverage gaps often develop slowly and unnoticed. One of the main causes is modernisation and extension measures that can increase the value of a property by 15% or more but are not considered in the policy. The general market value trend over the years also leads to a discrepancy. Another critical point is inheriting a property. Often these contracts are still based on the 1914 value, a calculation basis that laypeople can hardly comprehend. Heirs take over the existing contract and, with it, a potential underinsurance. Therefore, a review is essential. In 2022 alone, water damage caused costs of around 3.84 billion euros, accounting for 50% of the total insurance benefits. Without an adjusted insurance sum, such frequent incidents can quickly lead to a financial disaster, which could be avoided through a correct valuation.
Foundation of Security: The Central Role of Accurate Valuation
The exact property valuation is the only way to avoid coverage gaps. It forms the basis for a correct insurance sum and protects you from receiving only a fraction of the costs in the event of a claim. A professional market value appraisal according to § 194 BauGB provides a legally sound value and creates transparency. There are various methods of property valuation, whose results can vary by up to 20%. An incorrect calculation method alone can justify a coverage gap. For heirs, an appraisal is particularly important to verify the amount set by the previous owner and to argue substantively with the insurance company. With a data-driven analysis, such as that offered by Auctoa, you ensure that your protection is comprehensive. Our ImmoGPT-Chat can provide you with an initial assessment in just a few minutes. This lays the foundation for a solid insurance strategy.
In 4 steps to comprehensive protection for your property
To fully secure your property, a systematic approach is crucial. The following four steps will help you minimise risks:
Analyse existing policy: Review your current insurance contract. Pay attention to the sum insured and whether an underinsurance waiver has been agreed upon, which protects you from minor damages.
Perform a professional valuation: Have the current reconstruction value of your property determined by an expert. Only an appraisal will protect you from the consequences of a miscalculation of 20% or more.
Adjust the sum insured: Immediately report the newly determined value to your insurer. Adjust the policy after every value-enhancing measure, such as a loft conversion or energy refurbishment.
Check additional risks: Review your protection against natural hazards. In Germany, 54% of buildings are not insured against natural disasters like heavy rain. Comprehensive risk management is essential here.
This proactive approach ensures that your assets remain protected even in unforeseen events.
Special Case Inheritance: Why Heirs are Particularly at Risk
If you inherit a property, you automatically enter into the existing building insurance contract. This carries significant risks, as the insured sum often has not been adjusted for decades. In many cases, it is still based on the value from 1914, making it almost impossible for the new owner to assess it. Without a reassessment, heirs risk receiving only a fraction of the restoration costs in the event of damage. A storm damage, of which there were 1.19 million in 2022 alone, can therefore become an unexpected financial burden. It is crucial to act immediately after accepting the inheritance. A first step is to present the certificate of inheritance to the insurer, followed by commissioning an independent appraisal. A reliable valuation protects the inherited assets from substantial losses.
Digital Assistants: How Modern Technology Ensures Accurate Assessments
The days when a property valuation took weeks are over. Modern digital tools enable quick, data-driven appraisals and help to efficiently close coverage gaps. AI-supported platforms like Auctoa can provide a precise analysis of the reinstatement value within minutes. These tools access current market data, construction cost indices, and regional information to achieve an accuracy that is often not possible with manual estimates. This allows you to regularly review your insurance sum with minimal effort. This is particularly important as the average damage from fires alone increased by over 40% in 2022. Take advantage of digitalisation to minimise your financial risks. Test our ImmoGPT now without obligation and receive an initial valuation for your property.
deckungslucken-vermeiden
The risk of a coverage gap is real and can affect any property owner. With nearly 2.5 million claims per year, the risk is statistically significant. An outdated insurance sum inevitably leads to considerable financial losses in the event of an emergency. The key to avoiding this risk lies in a regular and professional valuation of your property. Only this way can you ensure that your insurance coverage corresponds to the actual conditions and fully applies in the event of damage. Don't wait until it's too late. A correct valuation is the best investment in the safety of your property.
Additional useful links
Statistisches Bundesamt (Destatis) provides comprehensive information on construction prices and the real estate price index in Germany.
The Sparkasse offers useful information on the land register and purchasing property.
The Bundesinstitut für Bau-, Stadt- und Raumforschung (BBSR) provides a dashboard with current data and reports on the real estate market.
The Bauherren-Schutzbund e.V. provides information on important insurance aspects when building a house.
The Verbraucherzentrale offers informed consumer advice on homeowners' building insurance.
FAQ
How can I identify a coverage gap in my property?
The safest way is to obtain a current, professional property valuation from an expert or a data-supported service like Auctoa. Compare the result with the sum insured specified in your policy. A significant discrepancy indicates a coverage gap.
What role does the waiver of underinsurance play?
An agreed waiver of underinsurance means that the insurer waives the assessment of underinsurance for claims up to the insured amount and pays the full claim. However, this often only applies if the initial valuation was carried out correctly (e.g. based on living area) and does not provide protection in the event of total loss exceeding the insured amount.
What do I need to do immediately as an heir to a property?
Inform the building insurance promptly about the case of inheritance and present the certificate of inheritance. Then, immediately have an independent valuation carried out to check the existing insurance sum and to identify and correct any underinsurance.
Does the insurance also cover damage to the property?
Building insurance typically covers the main building and its permanently attached parts. Separate agreements may be necessary for outbuildings like garages or garden sheds. Damage to plantings or from falling trees is often only covered by additional clauses.
Does a correct assessment increase my insurance premium?
An adjustment of the insured sum to the increased value usually results in a higher premium. However, this additional investment is small compared to the financial risk you face due to a coverage gap in the event of a claim.
Can I simply change my insurance to get better terms?
A change is possible, but it should be carefully considered. Never cancel the old contract before the new one is seamlessly in place. Frequent changes can lead insurers to view you as a high-maintenance, low-return customer, which might complicate goodwill services.
