Building is becoming more and more expensive. The rising costs of craftsmen and building materials are currently particularly felt by those who are building their own house. But residential building insurers also have to take the rising costs into account in their premium calculations. That’s why insured people usually don’t pay a fixed annual amount for their building insurance. Instead, the premium fluctuates year after year and depends on the so-called adjustment factor.
This adjustment factor will be 7.5 percent in 2024, which means that home insurance will be correspondingly more expensive in Germany. After all, the price increase is only about half as large as for 2023, when building insurance became on average 14.7 percent more expensive. And yet next year will be the second highest price increase in the past ten years. The long-term average during this period was 4.3 percent per year, according to figures from the German Insurance Association (GDV).
The online price comparison portal Check24 has calculated what the price increase could look like in a specific individual case: In the example, for a 230 square meter apartment building in Duisburg, around 2,178 euros per year are currently due for building insurance, with a deductible of 300 euros. The contribution adjustment adds 163 euros. In addition, there are annual cost increases due to the increasing age of the building. In this example, the surcharge would be around 2.35 percent or 51 euros.
Another example: Policyholders currently pay around 238 euros for a single-family home with 120 square meters in Dresden. The adjustment would increase the price by around 18 euros to 256 euros. A further 2.58 percent or 6 euros would be added next year for the increased building age.
Even if no owner or tenant is likely to be happy about the increase in costs, this is necessary for good reasons. If residential building insurance did not have the flexibility to adjust premiums to inflation, buildings would be underinsured after just a few years. In the event of a total loss – for example a house that burns down – the insurance would no longer be able to cover the reconstruction of the building.
That’s why buildings in Germany are in most cases insured at the so-called sliding replacement value, i.e. a sum that the insurer has to adjust regularly. The GDV publishes the so-called sliding new value factor every year. It is based on the construction prices for residential buildings and the collective wage prices for the construction industry. “Our policyholders can rely on the sliding replacement value insurance to fully cover damage that threatens their existence at any time,” says Anja Käfer-Rohrbach, deputy general manager of GDV. Nobody has to fear underinsurance in times of high inflation.
Advantages or not, residential building insurance will probably become too expensive for some people after the price adjustment. Anyone who would like to look for a cheaper alternative does not have an automatic special right of termination due to the price increase. This refers to a special right of termination if the insured person terminates the policy at the end of the month instead of, as is usually the case, up to three months before the end of the contract term. Insured people usually have this right if the insurer increases premiums without improving services.
Only: The annual adjustments due to the sliding replacement value are excluded from this regulation. “Policyholders should check their bill carefully when adjusting their premiums,” says André Boudon, managing director of residential building insurance at Check24. The annual financial statements can be used to calculate whether the contribution has increased due to the new adjustment factor. If this is the case, insured people will not be able to get out of their contract early. “If the insurer increases the premium regardless of this while the benefits remain the same, the insured have a special right of termination and the opportunity to switch to a new provider,” says Boudon.
This article first appeared on Capital.de.
