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What does underinsurance mean in German buildings insurance?
In short
Underinsurance (Unterversicherung) means the sum insured is lower than the cost of rebuilding your house. The insurer then pays every claim only in proportion. If the house is insured at 80 percent, you receive EUR 40,000 on a EUR 50,000 claim. This applies to small claims too, not only when the house is destroyed.
What it costs
Published figures for the calculation in 2026, and typical premiums.
| Example | Typical range |
|---|---|
| Sliding replacement value factor 2026 | 27.8 (2025: 26.7) |
| Premium adjustment factor 2026 | 27.63, about 4 percent more than 2025 |
| Rebuild value for a 1914 value of 20,000 marks | about EUR 452,700 (20,000 × 2,263.6 ÷ 100) |
| Detached house, premium for basic to extended cover | about EUR 130 to 350 a year |
Guide values as of September 2026 from published index figures and tariff examples. The premium rate in the example is a guide value from our quoting practice, as is the cost of an expert valuation of usually a few hundred euros.
Worked example
Detached house bought with the seller's 1998 policy, loft converted
The policy states a 1914 value of 20,000 marks. After the loft conversion, 25,000 marks would be correct. A pipe leak causes EUR 50,000 of damage.
| Correct rebuild value (25,000 × 2,263.6 ÷ 100) | EUR 565,900 |
| Insured rebuild value (20,000 × 2,263.6 ÷ 100) | EUR 452,720 |
| Insured share | 80 percent |
| Payment on the EUR 50,000 claim | EUR 40,000 |
| Premium with 20,000 instead of 25,000 marks, rate 0.8 per mille (guide value) | about EUR 442 instead of EUR 553 a year |
Saving about EUR 110 a year costs you EUR 10,000 in a single claim. If the house is destroyed, more than EUR 113,000 is missing.
How the insurer calculates
German law lets the insurer pay only in the ratio of sum insured to insured value if the house is significantly underinsured. For a house, the insured value is what an equivalent new building would cost today.
The cut applies to every claim. With 80 percent cover, a EUR 10,000 water claim pays EUR 8,000. If the house burns down, you also never get more than the sum insured.
| Insured share | Claim of EUR 20,000 | Claim of EUR 100,000 |
|---|---|---|
| 100 percent of the value | EUR 20,000 | EUR 100,000 |
| 90 percent | EUR 18,000 | EUR 90,000 |
| 80 percent | EUR 16,000 | EUR 80,000 |
| 70 percent | EUR 14,000 | EUR 70,000 |
The 1914 value, a German peculiarity
Most German houses are insured at sliding replacement value. The sum is stated in 1914 marks (Wert 1914) and converted every year to today's building prices with an index. It sounds odd, but it keeps your cover in line with rising building costs.
What it cannot fix is a wrong starting value. If the 1914 value was too low from the start, the house stays underinsured no matter how the index moves. This often happens when buyers take over the seller's policy without checking it.
What is different if you come from abroad
In the UK the rebuild cost is usually a figure in pounds that you set yourself. In Germany you either use the insurer's valuation form for the 1914 value or a tariff that is priced by living space. Both usually come with a waiver of underinsurance if your details are correct.
When you buy a house, the seller's policy passes to you. Ask for the policy documents before completion and check the 1914 value or the living space stated. You can cancel within one month after the change of ownership is registered.
How to rule out underinsurance
Many insurers waive the cut if the 1914 value was set with their valuation form or by an expert. Others price by living space: if square metres and fittings are stated correctly, there is no underinsurance.
The waiver only holds while your details stay correct. Report extensions, a conservatory, a converted basement or a high-end renovation. Otherwise the waiver can fall away. If your policy is priced by living space and nothing has changed, you do not need a costly expert report.
Step by step
- Check in the policy whether you are insured by 1914 value, living space or a fixed sum.
- Check whether a waiver of underinsurance is agreed.
- List every extension, conversion and renovation since the policy started.
- Have the 1914 value reset with the insurer's valuation form, or an expert report for unusual houses.
- Adjust the sum and get the waiver confirmed in writing.
Checklist
- Sliding replacement value, not a fixed euro sum
- Waiver of underinsurance in the policy
- 1914 value from a valuation form or expert report
- Living space correct, including converted loft or basement
- Extension, conservatory and solar panels reported
- Garage and outbuildings included or insured separately
Common mistakes
- Using the purchase price or market value as the sum insured
- Keeping the seller's policy without checking it
- Not reporting a loft conversion
- Keeping the sum low on purpose to save premium
Questions and answers
Frequently asked
When is a house underinsured?
As soon as the sum insured is below the rebuilding cost. The law speaks of a significant difference but sets no fixed percentage.
Does underinsurance affect small claims?
Yes. Every claim is reduced in the same ratio, not only a total loss.
Does the yearly index protect me?
Only against rising building prices. If the starting value is wrong, the gap remains.
Is overinsurance safer?
No. You pay more premium but never receive more than the actual damage.
Can I raise the sum at any time?
Yes, ask your insurer or us. The premium rises accordingly.
Sources
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