The insured capital, in the field of insurance , is the maximum compensation limit in the event of an accident. This amount arises from the agreement between the insurancecompany and its client.
The calculation of the insured capital varies according to the type of policy . For example, if the protection is against fire, the approximate value of the objects benefited by the coverage is taken as reference.
Also, in the case of life insurance , the insured capital is subject to other considerations. We refer, for example, to the contractor’s salary, outstanding mortgage debts and the existence of unhealthy habits that affect the person’s life expectancy.
It should be noted that the insured capital serves as the basis for estimating the policy premium . In addition, it must necessarily appear in the contract .
Capital and insured interest
There should be as much as possible a coincidence between capital and insured interest. The latter is the economic value affected by the occurrence of a risk.
If a good is being protected, the insured interest is estimated subsequently to the claim. For this, a survey is carried out .
Otherwise, if it is a life insurance , the insured interest is determined ‘a priori’ when preparing the contract.
Overinsurance and underinsurance
If the insured capital is greater than the insured interest, we are faced with an overinsurance situation. That is, the limit amount of coverage exceeds the valuation of damages. Therefore, the insurer will not disburse the maximum compensation, but up to the amount that allows to repair the damage.
On the contrary, if the insured capital is less than the insured interest, it is an underinsurance circumstance. The latter can happen, for example, if a work of art of US $ 2,000 is covered by US $ 1,000. Then, if a loss is made and the damages are US $ 1,000, the insurer willcompensate proportionally for US $ 500, that is, for 50% of the ‘limit value’.