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When we insure an asset, it is our responsibility to make sure that we declare its true value.

Each item that has insurance interest also has a real value based on which the Insurance Company calculates the corresponding premium. It is a well-known procedure that, however, often does not enjoy the appropriate attention that it deserves, with the result that either through negligence or intention, the Insured are faced with cases of underinsurance or overinsurance.

The case of Overinsurance 

Over-insurance means in simple words that while an item costs 100 euros we have declared it for 200. In this case the insured capital is twice its real value so that when the risk arises the insured does not have the right to receive the full compensation. . The reason this happens is because according to the principles of compensation that govern the insurance industry, the insured person is prohibited by law from making a profit through a contract insurance policy. When the reinsurance of the insured capital is found, any of the parties to the contract has the right to request the reduction of the declared value, which will also contribute to the reduction of the premiums.

The case of Insurance

Unlike overinsurance, underinsurance means that while an item costs 200 euros we have declared it for 100. In this case the insured capital is less than its real value so that when the risk arises the insurance company has the right to restore it. only a portion of the damage proportional to the premium he had set. In order for the Insurance Company to calculate the amount of compensation it will pay in such cases, it has - in fact, achieved equality in pricing - created the analog rule.

What does Proportional Rule mean and how does it work?

The Rulebook is essentially an equation that calculates the amount of compensation in the event of underinsurance. To calculate the compensation, the insurance company has only to multiply the insurance amount that was initially declared as the real value with the amount of the loss and then divide it by the real insurance value.