You buy a home or start a business. You take out an insurance policy, set an insured amount… and assume you’re protected. But are you?

In many cases, the insured value does not reflect the true reconstruction cost of the property. When a loss occurs — fire, collapse, explosion, and so on — the compensation often falls short of what’s needed to restore the property to its original condition.

The reason is simple: the insured amount was incorrectly calculated.

This article explains how to correctly determine the actual reconstruction value, what the PEM (Material Execution Budget) is, what it includes, and which indirect costs must be considered to avoid underinsurance.

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What Is the Actual Reconstruction Value?

The actual reconstruction value represents the total cost required to rebuild the property in the same condition it was before the loss. It includes: • Construction materials • Labor • Technical fees (architects, engineers, project managers) • Health and safety costs • Permits, fees, and taxes • Applicable VAT (10% or 21%)

This value has nothing to do with the market or cadastral value — those are based on economic or fiscal criteria, not construction reality.

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Why Is It So Important to Calculate It Correctly?

The reconstruction value determines the insured capital for the building (the “structure” or “building coverage”). If it’s underestimated, the proportional rule will apply in case of a claim, reducing your payout.

Example: • Actual reconstruction cost: €150,000 • Insured capital: €100,000 • Damage: €60,000 • Compensation after applying the proportional rule: €40,000

You lose €20,000 simply because the insured value was not correctly calculated.

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What Does Building (or “Structure”) Insurance Cover?

The building or structure (“continente”) refers to all the permanent, physical elements of a property: • Foundations, walls, ceilings, and floors • Fixed installations: electrical, plumbing, heating, gas • Doors, windows, shutters, built-in wardrobes • Attached structures: garages, storage rooms, pools, porches, boundary walls

The insurance covers material damage to these elements, up to the insured amount. If that amount does not reflect the true reconstruction cost, compensation will be reduced accordingly.

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How to Correctly Calculate the Reconstruction Value

1. Determine the total built area (m²) Include all built spaces: full floors, habitable attics, garages, basements, storage rooms, covered terraces, pools, and enclosed porches. 📌 Use the cadastral reference to ensure nothing is omitted.

2. Apply the PEM (Material Execution Budget) The PEM is the cost per square meter used in construction, varying according to: • Type of building • Geographic area • Quality level

Indicative values: • Standard housing: €700–€1,200/m² • Commercial premises: €1,500/m² and above

Sources for reference: • Professional associations (architects, engineers) • Valuation companies • Technical databases (CEDEX, ITeC, etc.) • Insurance experts or specialized brokers

3. Add indirect costs Beyond the base construction cost, include all related expenses: • Professional fees: 8%–12% of the PEM • Health and safety: 1%–2% • General expenses: coordination, site insurance, permits • Municipal taxes and building licenses • VAT (10% for residential / 21% for commercial)

These “hidden costs” are often overlooked and lead to underinsurance.

4. Include special structures and annexes Pools, pergolas, covered porches, outdoor garages, and boundary walls must be declared in the policy. Otherwise, they might be excluded from compensation. 📸 Recommendation: attach a cadastral map and a technical description of the property when setting or reviewing your insured value.

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How Often Should You Review the Insured Value?

At least once a year, and whenever there are significant changes: • Renovations or extensions • Change of property use • Improvements in materials or installations • Noticeable increases in local construction costs

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Can I Calculate It Myself?

You can estimate it, but professional advice is strongly recommended. Consult: • A qualified technician (architect or engineer) • A specialized insurance broker • Or request a professional valuation before insuring

At Claimsly, we provide technical assistance to review your property’s reconstruction value — ensuring your insured amount truly matches the reality of your building.

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Frequently Asked Questions

Can I use the market value as a reference? No. Market value depends on factors such as location or demand, which are unrelated to reconstruction cost.

What about the cadastral value? Also not suitable. Cadastral values are typically far below real rebuilding costs, which can lead to underinsurance.

What happens if I don’t declare an annex (e.g., a storage room or pool)? The insurer may exclude it from compensation or apply the proportional rule due to discrepancies with cadastral data....

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Conclusion

Calculating the actual reconstruction value is not just an administrative step — it’s the foundation of an effective building insurance policy.

A rigorous valuation today prevents financial loss tomorrow. At Claimsly, we help you insure with technical precision and full confidence.