Did you know that numerous properties in Germany are unknowingly underinsured? A minor error in the policy can lead to deductions of over 20% in the event of a claim. This article reveals the biggest risks and how to effectively eliminate them.
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The topic briefly and concisely
Underinsurance occurs when the sum insured is below the actual reinstatement value of a property.
In the event of a claim, insurers reduce the payout proportionally to the underinsurance, which also applies to partial damages.
The main causes are significantly increased construction costs (over 60% in 12 years) and undeclared renovations that enhance value.
Are you sure that your property is fully insured in the event of an emergency? Often, the reality is different. Due to rapidly rising construction costs and contracts that haven't been adjusted for years, a dangerous gap emerges: underinsurance. This means that the agreed insurance sum no longer covers the actual reinstatement value of your building. The financial consequences can be severe, potentially leaving you with tens of thousands of euros in costs. We explain the causes, highlight the specific financial risks of underinsurance, and provide you with a clear strategy to effectively protect your property.
The Core Issue: What Underinsurance Means for You
Underinsurance occurs when the sum insured in your policy is lower than the actual value of your property. Insurers already consider a 10% difference to be significant underinsurance. In the event of a claim, compensation will then be reduced proportionally to the ratio of the sum insured to the actual value. This applies not only to total losses but also to smaller partial damages, which surprises many owners. The financial risks are considerable and often go unnoticed. The causes are varied and develop gradually over the years.
The Silent Drivers of Risk: How Underinsurance Arises
The most common cause of underinsurance is the increase in property values that is not reflected in policies. Construction costs for residential buildings in Germany have risen by 64% between 2010 and 2022 alone. An insurance sum set ten years ago is now highly likely to be insufficient. In addition, there are often unreported modernisations or extensions. A new heat pump, solar panels on the roof, or a converted attic can quickly increase the property's value by five-figure amounts. If these changes are not reported to the insurer, a coverage gap arises. The consequences of outdated valuations thus pose a direct financial risk for every owner.
The Costly Reality: An Example Calculation of Benefit Reduction
The consequences of underinsurance can best be illustrated with a concrete example. Suppose the actual reconstruction value of your house is 500,000 euros. However, your insurance policy only covers 400,000 euros. So, you are 80% correctly insured, with an underinsurance of 20%. A storm then causes damage to the roof amounting to 50,000 euros. The insurer will not reimburse the full 50,000 euros. Instead, they will only pay 80% of the damage, which is 40,000 euros. You will be left to cover the remaining 10,000 euros. This principle of proportional reduction is stipulated in the Insurance Contract Act (VVG) §75. An accurate risk assessment of your property is therefore essential.
The Pitfall of the 'Value 1914': An Outdated Calculation Basis
Many older contracts use the so-called "1914 value" to calculate the insurance sum. This is a hypothetical calculation value indicating what a new build would have cost in 1914 in Goldmarks. To determine the present-day value, this base value is multiplied by the construction price index, published annually by the Federal Statistical Office. The system is coherent in itself, but it contains potential errors. If an outdated construction price index is used, or the 1914 value was originally set incorrectly, the entire calculation becomes faulty. This almost inevitably leads to an under- or overvaluation and the associated financial disadvantages.
Four strategic steps to avoid underinsurance
You can actively minimise the risks of underinsurance. The following measures effectively protect your assets:
Regularly review your insurance policy: Check your building insurance at least every two to three years. Pay particular attention to the sum insured and the basis of calculation.
Report value-enhancing measures immediately: Inform your insurer immediately about any structural changes, such as extensions, energy-efficient refurbishments, or the installation of expensive systems. A solar system can increase the value by over €15,000.
Agree on an underinsurance waiver: Many insurers offer a
Precision as Protection: The Advantage of Modern Property Valuation
Traditional estimates or outdated calculation models are often no longer up to today's market dynamics. Construction prices alone rose by 3.2% in February 2025 compared to the previous year. An AI-powered, data-driven property valuation by Auctoa analyses thousands of data points to determine an accurate, current replacement value. This value serves as a reliable basis for your insurance negotiations and closes the dangerous gap of underinsurance. You not only gain security but also a solid foundation for your entire risk management. Do you have a quick question about the value of your property? Try our ImmoGPT chat for a first assessment for free now.
unterversicherung-risiken
Additional useful links
Statistisches Bundesamt offers comprehensive information on construction prices and the property price index in Germany.
Statistisches Bundesamt contains detailed tables and data on construction prices and the property price index.
Gesamtverband der Deutschen Versicherungswirtschaft (GDV) offers an article about underinsurance of buildings against natural hazards in Germany.
Verbraucherzentrale provides information on the necessity and important aspects of home building insurance for homeowners.
Wikipedia offers a general definition and explanation of the term "underinsurance."
Deutsche Bundesbank provides statistics on real estate and construction performance prices in Germany.
Wikipedia explains the cost approach, a method for property valuation.
Gesetze im Internet (Bundesministerium der Justiz) contains the full text of the Insurance Contract Act (VVG) of 2008.
FAQ
What exactly is the waiver of underinsurance?
The waiver of underinsurance is a clause in the insurance contract. It declares that the insurer waives the examination of the sum insured in the event of a claim and therefore does not reduce the payout due to underinsurance. This is often subject to conditions, such as the living area being correctly stated or the valuation being conducted according to a specific scheme.
My insurance uses the living space model instead of the 1914 value. Am I still covered?
The floor space model is a modern alternative but comes with its own risks. If the specified living area is not accurate or special, expensive features are not separately recorded, underinsurance can also occur here. Regular checks are also important with this model.
How do solar panels and heat pumps affect the sum insured?
These installations significantly increase the building's value and must be reported to the insurer. They raise the restoration risk and require an upward adjustment of the insurance amount to avoid a coverage gap. Otherwise, there is a risk of underinsurance.
Can I rectify underinsurance retrospectively?
No, an adjustment of the insurance amount always only takes effect for the future. A loss that has already occurred will be settled based on the insurance amount that was valid at the time of the loss, even if it is too low. That is why proactive action is so important.
