In the Good Lender mortgage loan comparator, the independent expert José Luís López tells us about the proportional rule in insurance.
Real value of the insured good
One of the most important points is to determine the value that we insure and that is closest to the real value of the insured good, in order to optimize the amount of premium we pay . That is to say, to find the balance between the amount paid of the premium and that the coverage in case of an accident is as close to the total of the loss produced.
For this reason, if we compare the insured amount with the insurable or total value of the good we could find the following cases:
Full Insurance : We assure the total value, the insured amount and its value being identical; It is very difficult to give and match the two figures.
Underinsurance : The insured amount is less than the insurable value. The proportional rule would apply when making compensation
Compensation = (sum insured x sinister amount) / insurable value
The insurable amount is greater than the insurable value. It will recover the total value since it would never charge for a higher amount which means a payment higher than the optimum in the premium
Article 26. Insurance cannot be subject to unjust enrichment for the insured. For the determination of the damage, the value of the insured interest will be taken care of at the moment immediately prior to the realization of the loss.
When you take out home insurance with the bank, it is very important to ensure that the insured value of the continent (the house) is adequate . If you pay more it is useless and if you pay less we will have problems when we claim compensation.