Does home insurance pay the new value?
When you have damage to your belongings, your insurer will pay for the damage. However, there is a difference between the current value and the new value of your belongings. In most cases, an insurer pays out the new value, but there are some exceptions.
What is the difference between the current value and new value?
When your belongings are damaged due to fire or theft, you can claim the damage from your insurer. When, for example, your television has been stolen and it cost 1,200 euros in the shop, then this is the new value of that product. The current value of the product is the value that the product has immediately before the damage occurred. So if you have had your television for a year, the value may have dropped from EUR 1,200 to EUR 600. The current value is therefore usually much lower than the new value of the product.
When will the insurer pay out the current value?
Different insurers apply different rules. In the policy conditions of your household contents insurance you can always find the rules concerning the new value and the current market value. The current value is usually paid out when the current value is lower than 40% of the new value. The insurer determines the current value on the basis of depreciation lists. For example, a bank depreciates in 10 years, so the value decreases by 10% annually. Once the sofa is 6 years old, the value drops below 40% and the maximum daily value is paid. There are other peculiarities whereby the insurer will pay out the current value:
- When things are no longer used for their intended purpose
- Damage to boats and trailers
- Damage to awnings and antennae
- Items you have borrowed
Insurers assume the repair costs
When your belongings have been damaged by fire or a storm, for example, you do not immediately get everything new. When a stain has occurred in your couch due to a fire, the insurer first looks to see if repair is cheaper. Only when the repair costs exceed the new value will the insurer pay out this value. If the insurer uses the current market value as a basis, then the repair costs will also be reimbursed, unless they are higher than the current market value.
What about the depreciation of your household effects?
Many insurance companies publish the depreciation lists they use. You can check your insurer's website to see if they have published a depreciation list as well. In these lists you can see how much your household contents are worth at the time. For example, you write off a cupboard in ten years. So a four-year-old cupboard still has a value of 60% of the new value. If the cupboard is lost in a fire, you will still receive the new value.
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