Appraisals for insurance purposes

The value of the policy or the sum insured will determine the premium to be paid by the insured.

Depending on whether the sum insured coincides with the value of the asset or not, there are three possible scenarios:

• Full insurance: it occurs when the value of the insured asset and the policy sum protecting it coincide exactly.
• Overinsurance: it occurs when the sum insured is greater than the value of the insured asset.
• Underinsurance: this situation occurs when the sum insured is less than the value of the insured object. This is a very dangerous situation for the insured since, although he will pay a lower premium, with the sum insured he will not be able to cope with the damage that may occur to the insured object. The company will only be obliged to indemnify the damage in the proportion agreed in the policy.
• In the case of an assessment for insurance purposes for a property: We should never include the value of the land, since it is never insured. Likewise, depending on the type of policy handled by the contracting company, the foundations and foundations of the buildings should not be included in the calculation of the Replacement Value or Insurable Value, unless the policy specifies it.

In the case of having overinsurance, the cost of the premium to be paid will be higher, since the insurance company would be assuming a higher risk.

For the insurance company this is not usually a good deal either, since it may be due to a bad intention on the part of the contracting party to deliberately cause damage to the asset and charge more for it than it is worth.

Both parties may demand a reduction of the sum insured and the premium to bring it more in line with reality.