What are the implications of having a Home Insurance over unsuitable capital?
In case a policy has ensured capital superior to what it should, the compensation to be received will never surpass the reconstruction cost.
When the ensured capital is inferior to the cost of reconstruction (in case of property) or to the cost of substitution for a new one (in case of furniture and house content), the Insurer will only pay the part of the damages that is proportional to the relation between the cost of reconstruction or substitution, to the date of the accident, and the Insured capital.
For example, if a building whose reconstruction cost is €100.000 is insured for €60.000, the Insurer will be responsible for 60% of the damages, and the remaing 40% will be held by the Insured person. If an accident causes damages in the worth of €30.000 the Insurer will only compensate €18.000 (60% of €30.000), the Insured person will support the reaming 40%, which means €12.000.