An insurer may reduce a payout on the grounds of underinsurance if the applicable scheme allows it and the sum insured is too low in relation to the relevant value. The statutory rule is set out in Article 7:958(5) of the Dutch Civil Code (BW): if the sum insured is lower than the value on which the calculation of the loss is based, the compensation is reduced in proportion to the amount by which the sum insured falls short of that value. So first check whether a different arrangement applies under your policy: a guarantee against underinsurance (the insurer waives its right to invoke underinsurance, usually on condition that you have completed a valuation tool), or first loss cover (premier risque), French for “first risk”: payment is made up to an agreed maximum amount without a proportional reduction, regardless of the total value of your property. Then request the full calculation and the valuation on which the reduction is based.
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Written by Onur Arslan, attorney at Arslan Advocaten. Registered in the specialisation register of the Netherlands Bar for employment law and personal injury. Last updated: 22 September 2026.
Underinsurance often only comes to light after a fire, a burglary or major water damage. You have paid premiums for years, but receive only part of your loss. The key question is not just whether the sum insured seems low. What is decisive are the agreed valuation basis, the policy conditions and any guarantees.
What does underinsurance mean?
In the case of underinsurance, the sum insured is lower than the value that, under the policy, should have been insured. For a house, the rebuilding value may be relevant. Different valuation rules apply to home contents. For a business, underinsurance may concern buildings, stock, equipment or business interruption loss.
The WOZ value (the municipal property valuation) or the sale price of a home is not automatically the correct yardstick for buildings insurance. Those amounts say something different from the cost of repairing or rebuilding the building in accordance with the policy. So first ask which value the insurer is using and why.
How is a proportional reduction calculated?
If a proportional scheme applies, the ratio between the sum insured and the relevant value is applied to the covered loss. A simplified example makes the difference clear.
| Step | Input | Amount |
|---|---|---|
| A. Correct insurable value | What the insured interest was actually worth | €400,000 |
| B. Sum insured according to the policy schedule | The amount you were insured for | €300,000 |
| C. Ratio B ÷ A | €300,000 ÷ €400,000 | 75% |
| D. Covered loss | Assessed by the loss adjuster | €80,000 |
| E. Payout: C × D | 75% × €80,000 | €60,000 |
| F. Your shortfall | D − E | €20,000 |
This is an example calculation, not a rule for every policy. First have it checked whether this method may be used, which amounts belong in it and in what order an excess is applied. Also ask whether indexation or special costs outside the sum insured are taken into account.
Guarantee against underinsurance
A guarantee against underinsurance can prevent a sum insured that is too low from leading to a proportional reduction. The conditions of that guarantee are important. Sometimes a valuation tool must have been completed fully and correctly, changes must be reported in good time or the valuation must be renewed.
A guarantee does not mean that every cause and every item of loss is covered. Exclusions, excesses and separate maximums may still apply. So check whether the insurer is really applying a reduction for underinsurance or is using another limitation.
If the insurer claims that a guarantee has lapsed, ask when and on what grounds it is said to have ended. Collect the completed form, the confirmation, any reminders and messages about renovations or new possessions. Simply referring to an old valuation tool is not enough to understand the whole dispute.
What is first loss (premier risque) cover?
Under a premier risque arrangement, compensation is in principle paid up to the agreed maximum without a proportional reduction on account of a higher total value. The precise policy terms remain decisive. The maximum may still be lower than your total loss.
That differs from a full guarantee that every loss will be paid without limit. Keep three concepts apart. Premier risque: compensation up to an agreed maximum, without a proportional reduction, but that maximum may be lower than your total loss. Guarantee against underinsurance: the insurer waives its right to invoke underinsurance, usually on condition that you have completed a valuation tool and update it periodically. Proportional scheme: the standard situation, in which the payout is reduced according to the ratio between the sum insured and the actual value. Check on your policy schedule which of the three applies and, in the case of a guarantee, which condition is attached to it.
How to check the valuation
Request the underlying report and the data that were used. For a building, the floor area, volume, materials, level of finish, use and special structural features may be relevant. Check that the loss adjuster is not basing the calculation on a larger or more luxurious building than the one actually insured.
For home contents, an overview by category is useful. Ask for an explanation of how age, new value, current value and any special maximums have been taken into account. A dispute about a limit for jewellery, for example, is not necessarily an underinsurance issue.
For business policies, the chosen reference date must also be correct. Stock that fluctuates strongly with the seasons may raise different questions from stable equipment. Make sure the calculation matches the agreements on valuation, declaration and adjustment.
Did the insurance adviser give sufficient warning?
A low sum insured may also give reason to look into the advice given. What did you ask, what data were used and was it explained what an amount that is too low means in the event of a partial loss? The words ‘no guarantee’ are not a sufficient explanation in every situation.
How this works out in practice is shown by Kifid, the Dutch Financial Services Complaints Tribunal, Disputes Committee 16 March 2022, no. 2022-0209. The consumer’s home burned down almost completely, but because of underinsurance not all of the contents loss was paid out. The committee held that the intermediary had breached his duty of care: he had not advised suitable insurance and, when the policy was taken out, had given insufficient warning about the consequences of underinsurance. Nevertheless, the claim was rejected. The reason: after the policy was taken out, the intermediary had asked several times in writing for the contents valuation tool to be completed, after which a guarantee against underinsurance would have been granted, and each time the consumer had failed to do so. The lesson is twofold: an advice error must be assessed separately including its connection with the loss, and a request to complete a valuation tool is not a formality but precisely the moment at which you gain or lose the protection. See liability of an insurance adviser.
Challenging underinsurance in practice
Set the four elements side by side and mark for each line whether you agree or disagree. Then ask for the specific errors to be corrected and for payment of the undisputed part; that last point is often forgotten and immediately provides liquidity.
| Element | According to the insurer | According to you | How do you substantiate this? |
|---|---|---|---|
| 1. The policy arrangement | Proportional scheme under Article 7:958(5) of the Dutch Civil Code | Guarantee against underinsurance / premier risque / a clause excluding the reduction | Policy schedule and clause sheet, the completed valuation tool and its confirmation |
| 2. The sum insured | € … | € …, including indexation or a previously reported increase | The correct version of the policy schedule, correspondence about adjustments, premium invoices |
| 3. The correct value | € …, according to the valuation or valuation tool | € …, often lower than the insurer claims | The underlying report, the assumptions used, purchase receipts, photos, a counter-appraisal |
| 4. The calculation of the loss | € … | € … | Repair quotation, itemised breakdown, and whether new-for-old or depreciation was rightly applied |
A counter-appraiser can help with the value and the extent of the loss. A legal assessment is needed when there is a dispute about the interpretation or validity of a guarantee or clause. Coordinate both assignments: a new valuation is of little help if the real dispute concerns the applicable policy clause.
Do not sign a final assessment of the loss until it is clear whether you are thereby also agreeing to the underinsurance reduction. Preserve your claims and check the limitation periods and complaint deadlines. In insurance disputes there is no general six-week time limit for lodging an objection.
Signing for agreement
Check whether an agreement only records the extent of the loss or also covers cover and a full and final discharge. An appraisal form may have consequences for any later dispute. Ask for incorrect assumptions to be corrected before you agree.
If part of the claim is undisputed, ask whether that part can be paid in the meantime without waiving the rest of the dispute. Record any reservation clearly. An advance payment is not the same as a complete final settlement.
Challenging a valuation or loss adjuster’s report
Work item by item with the estimated quantity, the price and the difference you are disputing. Add quotations, purchase details, photos and relevant comparable items. A counter-appraiser can assess the extent of the loss from a technical point of view; a lawyer also assesses the policy and the legal consequences.
Reasonable costs of determining the loss may fall under the statutory rules for first-party property insurance. The Supreme Court of the Netherlands (Hoge Raad) ruled on this in ECLI:NL:HR:2022:81. That does not mean that every assignment and every rate will be reimbursed without limit. Agree the costs in advance.
Related topics
- Car damage: disputes about previous damage, repair or total loss
- Limitation periods, interest and costs in an insurance claim
Frequently asked questions about underinsurance
Can underinsurance also play a role in a small loss?
Yes, if a proportional scheme applies. The ratio can then be applied to a partial loss. So it is not only a problem when the entire building or all of the contents are lost.
Does annual indexation always prevent underinsurance?
No. Indexation can absorb an increase in value, but it will not necessarily correct a renovation, a change in business activities or an incorrect original declaration. Check which changes the policy requires you to report.
Is the insurer bound by my valuation tool?
That depends on the agreements made and the accuracy of the data. Keep the confirmation of any guarantee. Ask the insurer which element it disputes and what the consequence of that is under the policy conditions.
Can I avoid the reduction by increasing my cover after the loss?
A later increase does not automatically restore cover for a loss that has already occurred. An adjustment may, however, be needed for future risks. Keep the pending claim and the new cover administratively separate.
Is a separate maximum also underinsurance?
Not always. A maximum for one category of items or costs may apply regardless of the ratio between the sum insured and the total value. Ask which limitation is being applied exactly.
Do I need to complain about both the insurer and the adviser?
That may be necessary if both the assessment under the policy and the advice are in dispute. Each party has its own role. Make sure that a settlement with one party does not unintentionally limit a claim against the other.
Have the reduction recalculated
Would you like to know whether your insurer is rightly withholding part of your loss? Contact Arslan Advocaten with the policy, the valuation tool and the calculation of the loss. In the case of a fire, also read fire damage and an insurer that refuses to pay.
Legally reviewed by Onur Arslan, attorney at Arslan Advocaten. Reviewed on 13 September 2026.
Further reading on this topic
- Late reporting of a loss
- A second opinion on a loss assessment
- The insurer’s loss adjuster: independence and counter-appraisal
