Most homeowners believe they are adequately insured. Their home insurance policy is in place, premiums are paid, and the coverage appears comprehensive. Yet one essential question is rarely asked — until a loss occurs: does the insured value truly reflect the real value of the property and its contents?
Between the value declared at inception, the evolution of real estate assets, rising construction costs and changes in personal or international circumstances, the gap between what is insured and what should be insured can become significant. This gap, often invisible, has very real consequences: partial indemnification, application of the proportional rule, or even refusal of coverage for certain items.
For mobile, international or asset-owning profiles, this issue is even more critical. Primary residences, secondary homes, renovated properties, intermittently occupied houses, and valuable contents accumulated over time all raise the same fundamental question: is the insured value still accurate?
In home insurance, the insured value does not correspond to the purchase price of the property nor to its market value. It is based on precise technical concepts that are often misunderstood.
For the building itself, the reference is the reinstatement value. This is the cost required to rebuild the property identically following a total loss, taking into account materials, surface area, architectural features and the regulations applicable at the time of reconstruction. The land value is excluded, while professional fees, demolition costs and, depending on the policy, certain ancillary expenses are included.
For contents, the insured value covers furniture, equipment and everyday items, as well as built-in elements such as fitted kitchens, custom wardrobes or bespoke libraries. Valuable items are usually subject to specific sub-limits or dedicated guarantees.
A common mistake is to underestimate one or both of these components, either due to lack of information or because the initial assessment has never been updated.
When taking out a home insurance policy, the insured is responsible for declaring the value of the property and its contents. This declaration largely relies on the policyholder’s own estimates, sometimes assisted by standard valuation tools provided by insurers.
From a legal perspective, this declaration is binding. An underestimation, even if unintentional, may lead to the application of the proportional rule in the event of a claim. This mechanism, recognised under insurance law in many jurisdictions, allows the insurer to reduce compensation in proportion to the gap between the declared value and the actual value.
In practice, a property insured at 70% of its real value may only be indemnified at 70% of the loss amount, even in the case of a partial claim.
Underinsurance in home insurance is far from marginal. It is the result of several structural trends.
Construction costs have risen sharply in recent years due to higher material prices, labour shortages and increasingly stringent technical and environmental standards. A property insured based on an assessment made five or ten years ago may now be significantly undervalued.
Renovations and upgrades are another key factor. Extensions, high-end refurbishments, technical installations or bespoke fittings all increase the reinstatement value, yet are not always declared to the insurer.
Contents evolve as well. Furniture, electronic equipment, decorative items, collections and goods acquired abroad accumulate over time, often without any formal reassessment of their overall value.
It is only when a claim occurs that the issue of insured value becomes fully apparent. After a fire, a major water damage or a climate-related event, the loss adjuster will identify any discrepancy between the declared value and the actual value.
When underinsurance is established, compensation may be significantly reduced. This reduction is not arbitrary; it is the contractual and legal application of well-established principles that are frequently overlooked by policyholders.
For international profiles, additional complications may arise: longer adjustment processes, local interpretations of coverage, differences in market practices between countries, or difficulties in coordinating multiple policies.
Certain situations inherently increase the risk of underinsurance.
Intermittently occupied properties, such as second homes or temporarily vacant houses, are often subject to specific conditions and stricter declaration and prevention requirements.
Properties located abroad or owned by non-residents may be insured according to standards different from those of the owner’s home country, complicating the accurate assessment of insured values.
Evolving property portfolios combining multiple residences, mixed uses or frequent changes in personal circumstances (expatriation, relocation, partial letting) require a dynamic and comprehensive approach.
Being properly insured does not mean being overinsured. The objective is to align the insured value as closely as possible with reality, taking into account the property’s characteristics and actual use.
For the building, an assessment based on up-to-date reconstruction costs that reflects its technical and architectural features is essential. In some cases, independent experts can provide a more precise valuation.
For contents, a structured inventory, reviewed periodically, remains the most reliable approach. This does not require listing every single item, but rather identifying significant categories and elements requiring specific coverage.
Regularly reviewing insured values is a key discipline, particularly after renovation works, relocation or a change in international situation.
At IFO Global, insured value is treated as a core component of asset protection strategy, not merely as a contractual figure.
We assess each situation holistically, considering asset structures, actual use of properties, international context and anticipated changes. This approach enables us to identify vulnerabilities early and adjust coverage coherently, without unnecessary complexity for the client.
Our international presence and role as a single point of contact facilitate coordination across countries, insurers and regulatory frameworks, while ensuring a consistent and informed view of risk.
In home insurance, the real issue is not whether you are insured, but whether you are insured at the right value. The difference between actual value and declared value may appear theoretical until a claim exposes its very tangible consequences.
For international or asset-owning profiles, this issue deserves particular attention, given how fluid personal situations can be and how easily risks are underestimated. A rigorous and regularly updated valuation is now essential to effectively protect real estate and household assets.
Relying on advisors capable of understanding complexity, anticipating change and coordinating coverage across borders is a critical safeguard. It is within this framework of discreet, demanding and globally informed support that IFO Global operates.
