Overinsurance is the counterpart to underinsurance: it's when the sum insured stands ABOVE the property's real value. At first glance it looks harmless – “at least this way it'll be enough” – but it's actually an unnecessary expense: at claim time, the insurer pays no more than the actual loss, and the premium paid on the excess brings nothing in return.
- Overinsurance = the sum insured is higher than the property's real (rebuilding or replacement) value.
- At claim time, the ceiling is the actual loss: the amount above the real value brings no extra payout, yet its premium is still due year after year.
- Typical causes: a building insured at market price, and duplicate cover – for example, an overlap in a condominium.
Why doesn't a larger sum insured pay out more?
Property insurance is built on the principle of indemnity: its purpose is to restore the loss, not to generate a profit. If a house is insured for a sum above its real rebuilding value, even a total loss is settled at no more than the actual cost of rebuilding – the “margin” can't be converted into a payout. Yet the premium is proportional to the sum insured: you pay the premium on the excess year after year, for nothing in return. On top of that, for the part above the real value, the agreement on the sum insured is void under the Hungarian Civil Code (Ptk.), and a corresponding reduction of the premium can be requested – it's worth raising with the insurer; insuring at new (replacement) value, however, is not overinsurance.
This rule isn't insurer stinginess, it's the foundation of how the system works: insurance replaces a loss, it doesn't pay out a windfall. That's why the right sum insured isn't “as large as possible” but the real figure – the exact settlement rules are set out in the given insurer's terms.
The first typical route: a building insured at market price
The most common overinsurance mistake is confusing market price and rebuilding value. In a sought-after area – typically inner-city – a significant part of the market price is the value of the land and the location, and neither is destroyed by a claim. Anyone who sets the sum insured from listing prices ends up paying an unnecessary premium on the difference, year after year.
The right basis here, too, is the rebuilding cost: based on floor area, structure and fittings – without the land. Recommended per-square-metre values are a good starting point, which we then refine to your house's particular features. That way the premium covers exactly what the insurer would actually restore at claim time.
The second route: duplicate cover
In a condominium flat, it's common for the building's shared insurance and your own home insurance to overlap in covering certain building elements – in that case, premium is being paid twice for the same value. Once the boundary is clarified (where mine ends and the building's begins), your own policy can be sized more precisely. It also happens that two live policies run on one property – for instance, after moving house or an inheritance, where the old one was never closed.
Double cover doesn't bring a double payout, it creates a situation that needs sorting out – in that case, the task is to align the policies, not to keep paying two premiums in parallel.
How to bring it back into balance
The fix is the same as for underinsurance, just from the other direction: real values and regular upkeep. During the annual review, the sum insured can be adjusted downward too, where justified – and the premium this frees up is often worth redirecting to cover that's actually missing: a stronger liability limit or a useful optional cover typically counts for more than an excess sum that's insuring thin air.
If you're unsure where things stand right now, taking stock is quick: reviewing your existing policy takes a quarter of an hour, and gives a clear picture – of sums insured, overlaps and gaps alike.
A question about your own home? Run the numbers in minutes with the online calculator (in Hungarian), or book a free 20-minute consultation →
