Insured Capital vs. Real Value: The Mistake That Could Cost You Thousands of Euros
Fecha: 2025-06-04
Taking Out Insurance Doesn't Always Mean You're Protected
One of the most common—and dangerous—mistakes is insuring for less than the real value, resulting in insufficient insured capital. In the event of a claim, this can mean your insurer won't pay you enough to repair or replace what was damaged.
The result? You lose money. Sometimes thousands of euros.
In this article, we’ll explain the difference between insured capital and real value, how to avoid being underinsured, what the proportional rule is, and how to properly calculate the amount you should insure.
What Is Insured Capital?
Insured capital is the maximum amount the insurer will pay in the event of a loss. You choose it when taking out the policy—but it’s often miscalculated.
For example:
You insure your home for €100,000, but the real cost to rebuild it is €150,000.
If a fire occurs, you'll only receive compensation up to €100,000—even if the total damage is greater.
What Is Real Value?
Real value refers to the current cost of rebuilding or replacing the insured asset. It's not the market or cadastral value.
For homes, it includes:
Construction cost per m² (based on local PEM module)
Technical fees and professional services
Health and safety costs
Municipal permits and fees
Applicable VAT (10% or 21%)
A home might have a market value of €120,000 but a real reconstruction cost of €160,000.
What Happens If Insured Capital Is Below Real Value?
When insured capital is lower than the real value, you are underinsured. In the event of a claim, the insurer applies the proportional rule.
What Is the Proportional Rule?
It’s a mechanism that allows the insurer to reduce the payout in proportion to your level of underinsurance.
Example:
Insured capital: €100,000
Real value: €140,000
Percentage insured: 71%
Real damages: €70,000
Compensation: 71% of €70,000 = €49,700
You lose €20,300 just because you didn’t insure the property correctly.
Why Is This Mistake So Common?
Several reasons lead people to take out a policy with insufficient capital:
- Confusing Market Value with Rebuilding Cost
Many people insure their property based on the purchase price or cadastral value, instead of the actual rebuilding cost.
- Not Updating the Policy After Renovations
When you renovate (new bathrooms, kitchens, extensions…), the real value increases—but the insured capital often stays the same.
- Choosing the Cheapest Policy
To get the lowest premium, the insured capital is lowered—which reduces your actual coverage.
- Lack of Technical Knowledge
Most people don’t know how to calculate the value of the building, contents, or equipment—so they declare rough figures without technical backing.
How to Properly Calculate Insured Capital
- Building (structure of the property)
Includes walls, floors, ceilings, fixed installations, garage, storage, and fixed elements like windows or doors.
To calculate:
Multiply the built surface area by the current PEM rate in your area
Add technical fees, safety costs, permits, and VAT
Tip: Insure for reconstruction value, not purchase price or appraisal value.
- Contents (furniture, appliances, clothing, etc.)
Make an estimated inventory of:
Furniture, electronics, clothing, household items
Appliances (fridge, oven, washing machine…)
Work-from-home equipment or special tools
Don’t just declare a standard number—better to overestimate than fall short.
- Machinery or Technical Equipment (for businesses)
Includes industrial machinery (e.g., ovens, cold storage units, etc.)
Keep invoices, technical data sheets, and model info
Crucial if you own a business or commercial space
How to Check If You're Underinsured
Ask yourself:
Have you calculated the real value with professional help?
Have you considered renovations or expansions?
Does your policy include outdoor features (pool, pergola, garage…)?
Have you inventoried contents or just estimated a figure?
Have you compared your insured capital to the real reconstruction cost?
If you answered "no" to any of these, your policy might be undervalued.
What to Do If You're Already Underinsured
If you catch the mistake before a claim:
Contact your insurer to update your insured capital
Request a professional valuation of building and contents
Review your policy yearly or after any significant renovation
What If You've Already Suffered a Loss and the Proportional Rule Was Applied?
In that case, you need to:
Request the insurer’s expert report
Check whether the proportional rule was fairly applied
File a claim if the reduction seems excessive
Provide professional valuations or technical reports to support your case
And if you need legal or technical help, MataSeguros can support you.
Frequently Asked Questions
Can the insurer apply the proportional rule without notifying me?
Yes—if they detect underinsurance. That’s why it’s critical to review your policy regularly.
What tolerance does the Consorcio de Compensación allow?
Generally, a 23% margin is accepted. If you exceed it, the proportional rule is applied.
Can I overinsure to be on the safe side?
No. That’s called overinsurance, and it doesn’t increase your payout—it just increases your premium unnecessarily.
Conclusion
Insuring your home or business for less than its real value can be a costly mistake.
Insufficient insured capital is one of the most common errors—and one of the most harmful when it comes time to claim.
Avoid nasty surprises. Calculate carefully. Update your policy. And if you need help, at MataSeguros we’re here to protect you from underinsurance too.
📩 Contact us to review your case—no strings attached.