Evaluating property and contents - House Insurance
At the time of evaluating property and contents – before doing a house insurance – you must be as accurate as possible. If the value indicated in the insurance proposal goes above or below the real value, you will risk to not receiving the fair compensation in case of accident.
The value of contents changes over the years due to the effect of inflation. Therefore, most of the insurances already provide the automatic update of the sum insured. But of course as you acquire new assets as time passes, you should update the capital for the goods every 4 or 5 years. If you do improvements on the property (painting, replacement of plumbing, air conditioning, etc,) you should also update the value of the property to the insurer.
Protecting the property
The value for insurance purposes is the cost of reconstruction. This is calculated based on the area of the house and the price per square meter of the area where it is located. In general, the cost of reconstruction is much lower than the market value because the cost of the land is not considered. Factors of valuation of the property are also not counted, such as proximity to shopping areas and transport, exposure to the sun, the floor, etc.
So do not be fooled by the banks, which require an insurance for the value of the loan (generally much higher). If you do it, you’ll pay a premium for a capital that you’d never receive. If there is a wide disparity between your calculation and the value indicated by the bank, you must require a correction. If the bank refuses, you must complain to the authorities.
On the other hand, it has no interest in entering a value below the reconstruction to save on the premium. In case of accident, the compensation may not be enough to replace what was damaged. If, for example, your home is partially destroyed after a fire, the insurer only pays the damage in the proportion of the sum insured and the actual value of assets. The rest must be paid by the insured.
Calculating the value of the contents
The capital must be sufficient to replace the furniture, appliances and other damaged goods (clothes, dishes, records and movies, for example). Therefore, they should be valued by the replacement price of a new one, as of today. Add 10% to the amount calculated as a safety margin for possible errors of assessment.
The special objects such as antiques, works of art, jewellery, computers, collections, guns and furs should be evaluated and discriminated individually in the insurance policy. Only this way you will receive a fair compensation. If you do not, in case of accident, the insurer will only pay up to a determined value per object. If, on the whole, the value of these objects exceed a percentage of the total goods (usually 30%), the insurer will apply an aggravation to the prize.
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