Underinsured without knowing it: the most frequent situations in Luxembourg
Definition: Underinsurance occurs when the value declared in an insurance policy is lower than the actual value of the property or risk covered. In the event of a claim, the compensation is then calculated on the basis of the policy taken out and the items insured.
Most common situations in Luxembourg:
- A home where the reconstruction value has not been reassessed following building work
- Underestimated contents due to a lack of an up-to-date inventory
- Civil liability cover that does not reflect the current situation: birth of a child, pet
- Lack of personal accident cover for risks in private life
- Insufficient retirement savings given the foreseeable gap between final salary and state pension
Compare the declared value in the policies with the actual current value of the property and risks covered. An insurance review allows you to assess this in a structured manner.
↓ What does it mean to be underinsured?
↓ Your home has changed, but your policy has not
↓ Your furniture contents are probably underestimated
↓ Your private civil liability may no longer necessarily cover your household
↓ Your car is only insured for civil liability, but it still has value
↓ Your provident plan has not followed the course of your life
↓ FAQ - Underinsurance in Luxembourg
Being underinsured means having policies that are no longer adequate for your real situation. Not because they were poorly done in the first place — but because your life has evolved and your insurance cover has not followed.
Concretely, this is manifested in three ways:
- The amounts insured are too low compared to the current value of your property (your house is worth more than at the time of subscription, but it is still insured for the previous value).
- You do not have adequate guarantees to cover your situation today (an animal, an additional child...).
- Your situation has changed without your policies having been updated (change to independent status, new loan, divorce).
The issue is simple: at the time of a claim, compensation is calculated on the basis of what you have declared in your policy and not on what you own. The difference remains your responsibility, even if you have always paid your premiums.
This is probably the most common case of underinsurance in Luxembourg.
You took out your home insurance at the time of purchase or when you moved in. Since then, changes have been made:
- Renovation of the kitchen or bathroom
- Layout of the attic or addition of a veranda
- Installation of an electric charging station
- New heating system (heat pump, pellet stove)
- Installation of solar panels
Each of these items increases the value of your property. If your policy has not been updated, the amount insured is less than this actual value and the compensation will be reduced by the same amount.
When you declare the value of your furniture, you spontaneously think of the main categories. We often forget the rest.
Do the exercise: estimate the replacement value as new (not used) for everything in your home.
The basics that are often overlooked:
-
Appliances: oven, dishwasher, refrigerator, washing machine, dryer
- Electronics: computers, televisions, tablets, consoles, headphones
- Furniture: beds, sofas, tables, wardrobes, storage
- Clothes and shoes for the whole family
And if your life has changed in recent years:
Got a new hobby or passion?
A road bike or electric mountain bike can be worth 2,000 - 6,000 €. Musical instruments, photo equipment or specialised sports equipment quickly accumulate.
Have you equipped your exterior areas?
Garden furniture, high-end barbecue, jacuzzi, garden shed with tools, equipped cabana: a well-appointed outdoor space is often worth 5,000 - 15,000€, and is rarely declared.
Have you invested in a wine cellar or multimedia equipment?
A wine collection, a video projector, a sound bar, a home theatre: so many items that raise the real value far beyond the initial estimates.
Private liability covers damage that you, or members of your household, cause to third parties in everyday life. It's a policy that we sign and then forget, but your household changes.
A few common situations where a CL policy may no longer be suitable:
- You have had one or more children: remember to declare them to your insurer, the CL policy will also cover them for school or extracurricular activities.
- You have adopted a dog: some policies may exclude so-called dangerous breeds or require additional guarantees.
- You do a volunteer activity: supervise children during a sports activity, give private lessons, organise a community event: these situations can be outside the scope of a standard CL policy.
In the event of an uncovered claim, the amounts of personal expenses can quickly reach several tens of thousands of euros.
In Luxembourg, only motor vehicle liability is mandatory. Many drivers may be tempted to only insure their vehicle for CL, to limit costs or because the vehicle is already older.
The problem is clear cut: if your vehicle is stolen, set on fire or severely damaged by a natural event, you will not be compensated. Civil liability covers damage you cause to others, not damage to your own vehicle.
Casco cover (partial or full) remains relevant as long as the vehicle has significant value.
A provident plan is not limited to anticipating retirement or death. It also covers the hardships of everyday life: an accident, temporary or partial disability. These are situations that we always imagine happening to others, until the day they happen to us.
Here are a few concrete situations where a mismatch frequently appears.
- You had a child. A child is a financial burden that lasts 20 years. Education, activities, higher education. Have you thought about taking out a life insurance policy for your child to start saving from his/her birth?
- You are not covered in the event of an accident in your private life. A fall on stairs, a bike accident during the weekend, an injury while playing sports. These situations are not covered by your car insurance or your CL policy. Without individual accident insurance, the physical consequences, and their financial consequences, remain largely at your expense. This is a common blind spot, including for people who are otherwise well insured.
- You're nearing retirement, or you're not thinking about it yet. Your statutory pension will not cover the standard of living to which you are accustomed. The sooner you start saving in a supplemental plan, the more limited the monthly effort.
There is no simple method to check all of your policies alone. The terms and conditions are long, the interactions between guarantees can be complex, and some gaps are only seen when we put all the policies side by side.
This is facilitated by an insurance review.
An advisor reviews your active policies — home, CL, auto, provident — identifies value mismatches, gaps, and potential duplicates, and gives you a clear picture of your actual cover. You’re under no obligation to change anything.
In an agency or by video conference, without commitment.
The most reliable way is to compare what is stated in your policies with your current situation. A few concrete points to check for yourself:
- The reconstruction value of your home: check your latest tax statement or ask a real estate professional for an updated estimate.
- The contents of your home: go around each room and estimate what it would cost you to replace everything with new items in the event of a total loss.
- Your civil liability limits: are they consistent with your current wealth and income?
- Your family situation: marriage, birth, or divorce changes your coverage needs, often without policies being updated.
If you identify any gaps in cover for any of these situations, you could be underinsured. An insurance review makes it possible to carry out this verification in a complete and structured manner.
It depends on your policy. In Luxembourg, coverage for natural disasters — floods, storms, earthquakes — is not automatically included in all home insurance policies. It can be included as an optional guarantee or integrated into an extended plan. In our Home contract, it is included in your policy starting from the "Essentiel" plan.
To find out, check the terms and conditions of your policy under the heading "natural events" or "climate damage". If in doubt, your agent can confirm what's covered and what's not
Mainly: a move, major work, a birth, marriage or divorce, adoption of an animal, a change of professional status (including self-employment), a new mortgage, or the purchase of a vehicle.
A review every two to three years is reasonable in the absence of a major change. But ideally, every important life event should trigger a quick review of your policies.
Are your policies more than two years old without having been modified? This is probably the right time to do an insurance review.
No. The review proposed by Baloise Luxembourg is free of charge and without commitment. It lasts about 45 minutes and can be done in an agency or by video conference.