Insurance

Rebuild cost vs market value: how the sum insured is set

Rebuild cost is the cost to construct the building new today, land excluded; market value is what a buyer pays for building, land and location together. Policies set the sum insured on one basis or the other, and when the sum falls short a proportional clause can cut every claim, as Union's terms do beyond a 15 percent tolerance.

1,400 vs 2,190
EUR/m2: rebuild value against the top asking price for comparable flats in one 2025 expert appraisal of a 70 m2 panel flat: 7 of 9
online household carriers whose current terms put a flat on market value rather than rebuild cost: 15 %
tolerance below which Union applies no proportional reduction (VPPOB/2504, Art. 12 para. 15); 10 to 30 % at other carriers: 115 %
cap on the total-loss payout for a condemned flat, relative to the sum insured, under the same terms (Art. 12 para. 4): 1 July 2027
proposed effective date of the new Slovak civil code, whose § 1576 makes proportional reduction the statutory default: 3.954
price-level coefficient (kCU) for 1Q/2025 that lifts 1996-base unit costs to today's construction prices

Two values for one building

Rebuild cost, in valuation language the reproduction or new value (in Slovak practice východisková hodnota, in Czech nová cena), is what it would cost to construct the same building, of the same kind, quality and extent, at the same place, new, today, including design fees. It is a cost calculation: it does not contain the land, the view, the neighborhood or the state of demand. Market value (všeobecná or trhová hodnota, obvyklá cena) is the most probable price the property would fetch between a willing buyer and seller in open competition, and it contains all of those things. A third figure sits between them: the technical value, rebuild cost less wear, which the Slovak decree 492/2004 on general value uses as the bridge from cost to market by multiplying it with a location coefficient.

The decree's formula for a building is VH = M × (RU × kCU × kV × kZP × kVP × kK × kM): the measured quantity M (floor area for a flat, built-up area per storey for a house) times a unit cost RU fixed at 1996 prices, updated by the price-level coefficient kCU and adjusted for fit-out, material and location. One 2025 appraisal of a 70.11 m2 panel flat built in 1976 ran it as 325.30 EUR/m2 × 3.831 × 1.037 × 1.0618 × 1.02 = 1,399.64 EUR/m2, or 98,129 EUR for the flat. The general value in the same report was 1,064 EUR/m2, and comparable flats were being offered at 1,667 to 2,190 EUR/m2. Nothing in that spread is an error. Rebuild cost, official value and market value are three different quantities, and the sum insured must be set on the one the policy names.

Why they diverge

The gap between rebuild cost and market value is not a fixed percentage; it moves with land prices, location and age, in opposite directions for different drivers. The table shows how each driver enters the two values, using the coefficient ranges of decree 492/2004 as the reference for the cost side.

Driver	Effect on rebuild cost	Effect on market value
Land	None: a rebuild sum covers the structure only	Included; in a city the plot can be worth more than the building on it
Location and demand	Small: the decree's territorial coefficient kM runs from 1.00 in a village to at most 1.15 in the capital	Large: the location-differentiation coefficient kPD that turns technical value into general value runs from about 0.8 in a village to 2.0 in the capital, a 2.5-fold range
Age and wear	None in the new value; wear enters only the technical value, with residual value floored at 20 %	Priced in by buyers, but the discount for age is far smaller than straight-line wear
Construction cost inflation	Direct: the price-level coefficient kCU moved from 3.831 (4Q/2024) to 3.954 (1Q/2025), a 3.2 % rise in one quarter	Indirect; asking prices can rise faster or slower than construction costs
Material	Panel 1.04, brick 1.00, monolithic concrete 1.16 via the material coefficient kK	Buyers pay a premium for brick over panel that the cost side does not show
New build versus existing stock	Same cost for the same building	New builds carry a premium the rebuild formula ignores, so their market value can exceed rebuild cost by a wide margin even outside the capital

Coefficient ranges follow the tables of vyhláška 492/2004.

What the law says: two models

Whether a shortfall in the sum insured cuts a claim is a legal question before it is an actuarial one, and neighboring civil codes answer it differently. The Czech civil code makes proportional reduction the statutory default; the Slovak code in force today has no rule at all and leaves everything to the policy terms; the Slovak draft code would move to the Czech model in 2027.

Question	Czech civil code (89/2012 Sb.)	Slovak civil code today (40/1964 Zb.)	Slovak draft code (proposed from 1 July 2027)
Default value basis	§ 2849: the usual (market) price at the time of valuation unless agreed otherwise	Not defined; § 806 delegates the amount of indemnity to the policy terms, which § 788(3) makes part of the contract	§ 1601: for a building, the sum for which it can be built as new; for other property, the acquisition cost in its current state
Underinsurance rule	§ 2854: if the sum insured is lower than the insured value at the time of the event, the payout is reduced in the same ratio unless the parties exclude it	None: the words podpoistenie, nová cena and všeobecná hodnota do not occur in §§ 788 to 828a; any reduction exists only through the terms	§ 1576: reduction in the ratio of sum insured to insured value unless agreed otherwise, with no statutory tolerance
Consumer protection	General unfair-terms control	§ 53(1) unfair-terms test and § 54(2) reading in the consumer's favor; in 5Cdo/203/2018 the Supreme Court held that the insurer bears the burden of proving the higher value it pleads	Dispositive, so contractual tolerances and calculator guarantees would still work if written into the terms
Over-insurance	Payout limited to the insured value	Contractual; Union pays only up to the value immediately before the event (Art. 12 para. 16)	§ 1575: a 10 % band and a right to rebalance

Consolidated statute texts and the September 2025 government draft; see the sources list. The draft was in second reading in June 2026 and not enacted at the time of writing.

How carriers set the sum insured

Because the Slovak statute is silent, everything that matters sits in each carrier's general terms (VPP), and no two are alike. The table summarizes the current terms of nine carriers that quote household cover online, for a flat: which value the sum must match, how far the sum may fall short before a proportional cut, whether a sum computed by the carrier's own calculator is guaranteed, and what happens when the block is condemned. Houses are on rebuild cost everywhere.

Carrier and terms	Value basis for a flat	Tolerance before proportional reduction	Calculator guarantee	Flat total loss
Union, VPPOB/2504 (17 Apr 2025)	Higher of new value and market value	15 %, and only if indexation was interrupted or the inputs were wrong; the denominator is the new value, never market value	Yes: carrier-set sum from true inputs plus uninterrupted indexation	Market value, capped at 115 % of the sum insured
Allianz, Môj domov guide (1 May 2025)	New value, including 100 % of common parts exclusive to the flat	No tolerance in the text	Only as an online declaration	Not addressed
Generali, DOMino terms	"New price of a flat" defined as the price of a comparable flat in the locality, which is market value by another name	No percentage tolerance	Waived if the sum is at least 90 % of the recommended sum and indexation is agreed	Not addressed
Kooperativa, VPP MO 2026 (19 Jun 2026)	New value; market only on demolition	Shortfall above 10 %, and only if caused by the policyholder after a warning	Yes: sum at or above the carrier-set figure plus indexation	Market value, up to the sum insured
UNIQA, Domov & bezpečie (1 Jan 2026)	Market value if higher than new value	Not applied if the shortfall is under 20 %	Yes, if carrier-calculated and indexed	Not addressed
ČSOB, Domos Kompakt (18 Oct 2024)	Market value; the client may cut the recommended minimum by up to 20 %	No percentage tolerance in the text	Conditional on the sum matching value at inception and value rises above 20 % being reported	Market value, up to the sum insured
Wüstenrot, W dobrom domov (10 May 2025)	Market value	Reduction only if the shortfall exceeds 20 %	None explicit; yearly indexation offered, silence is consent	Not addressed
Komunálna, ProDomo (19 Jun 2026)	Market value, only if higher than new value	Above 10 %, sublimits included	Yes: sum at or above the carrier-set figure plus indexation	Not addressed
Colonnade, VIVA (1 Jun 2026)	New value; the policyholder is responsible for the sum	A shortfall of 30 % or more allows a proportionate cut, at the carrier's discretion	None; indexation optional	Not addressed

Current VPP documents downloaded and text-extracted on 10 September 2026 and summarized by Bytero; quote the carrier's clause, not this table, in any dispute.

Calculators do not follow the terms

Seven of the nine carriers write a flat on market value, but their online calculators prefill something else. Measured prefills for flats in 2026 sweeps were about 1,084, 1,196 and 1,641 EUR/m2 at Union depending on city tier (brick stock at 1.04 times panel), 1,860 to 2,232 EUR/m2 at ČSOB, 1,291 to 1,398 at Komunálna, 1,900 to 3,500 at Generali, and 490 to 3,850 at Wüstenrot by locality. Only the last behaves like the market value its terms ask for; the others prefill a rebuild-type figure under terms that say market. At Union the prefilled sum is the floor of the form, cannot be lowered, and has a ceiling of 1.5 million EUR.

The consequence splits by loss type. For a partial loss, a prefilled sum is protected: the calculator guarantee promises no proportional cut as long as the inputs were complete and true and indexation was never interrupted, and Union's reduction test compares the sum only with the new value anyway. For a total loss with ordered demolition, the same flat is paid at market value but capped at 115 percent of the sum, so a city-center flat carried at a prefilled 1,641 EUR/m2 is short by roughly market value minus 1.15 times the prefill. The gap is a total-loss gap, not a partial-loss gap, and it is widest exactly where market value runs furthest above construction cost.

Area definitions differ by carrier

Every calculator asks for an area and no two mean the same thing, so a sum per square meter is only meaningful together with the definition of the meter. The table lists the quantities in use and the rules of thumb that connect them for a masonry house; flats are simpler, because every calculator takes the floor area of the flat as registered, which excludes balconies, loggias, terraces and cellars.

Quantity	Definition	Relation to the others	Who asks for it
Footprint (built-up area)	Outer-wall outline at ground level	The base of everything else	Generali, together with the number of above-ground storeys
Gross floor area	Footprint summed over every storey, including a habitable attic and a garage under the same roof; balconies and non-habitable attics excluded	Footprint × storeys; the decree 492/2004 rebuild basis for houses	Union ("total built-up area of the house"), Wüstenrot (per-storey list plus cellar)
Net floor area	Inside the walls, all rooms; attic counted only where the ceiling clears 1.3 m	About 0.80 × gross; an attic storey is about 0.6 of its footprint	ČSOB, UNIQA (living area), Allianz
Usable area	Net floor area plus cellar, garage and storage	Larger than net	Colonnade, per its runbook
Living area	Habitable rooms only	About 0.6 × net	Older forms and some agent questionnaires
Enclosed volume	The building volume in m3 under the Slovak standard STN 73 4055	Geometric quantity; not a pricing basis in current appraisal practice	Reported by surveyors; useful as a cross-check

Bytero review of the carriers' calculator help texts and forms, September 2026; rows marked as assumed there are shown with their most likely reading.

Underinsurance and proportional reduction: a worked example

A flat is insured for 150,000 EUR, its market value is 250,000 EUR, and a burst pipe causes 10,000 EUR of damage. The textbook proportional answer is 10,000 × 150,000 / 250,000 = 6,000 EUR before the deductible. Under Union's VPPOB/2504 that is almost never the result, because the reduction denominator is the new value, a 15 percent band applies, and the calculator guarantee can switch the clause off. The table shows what changes the outcome.

Situation	Payout before deductible	Why
250,000 EUR is the market value and the flat's rebuild value is at most 176,470 EUR (150,000 / 0.85)	10,000 EUR	Market value is not the test; the shortfall against new value is within the 15 % tolerance
The sum was Union's own calculator output from true inputs and indexation was never interrupted	10,000 EUR	Calculator guarantee, Art. 7 para. 4
Indexation refused or interrupted and rebuild value 200,000 EUR	7,500 EUR	10,000 × 150,000 / 200,000; shortfall of 25 % exceeds the band
Indexation refused or interrupted and rebuild value 250,000 EUR	6,000 EUR	The textbook proportional result
Total loss, block condemned, market value 250,000 EUR	172,500 EUR	115 % × 150,000; the market-value clause is capped
Same facts under terms with no tolerance and market value as the insured value	6,000 EUR	The naive answer is the real answer at some carriers and would be the statutory default under the draft § 1576

Cases applying VPPOB/2504 Art. 7 para. 4 and Art. 12 paras. 4 and 15.

Indexation and the calculator guarantee

The two protections a policyholder has against a proportional cut are the tolerance band and the guarantee, and both depend on indexation. Union indexes unilaterally every year: flats by the central bank's residential price index, houses, flats and garages by the statistical office's construction price indices, contents by consumer prices, with notice ten weeks before renewal and termination six weeks before renewal as the only opt-out. Kooperativa, Komunálna, UNIQA and Generali tie their guarantee to indexation in the same way, Generali additionally to a sum of at least 90 percent of its recommendation; Wüstenrot offers indexation yearly and treats silence as consent; Colonnade leaves it optional and gives no guarantee at all.

The guarantee has two conditions everywhere it exists: inputs complete and true, and indexation never interrupted. A wrong area, a wrong material or a refused indexation letter returns the contract to proportional reduction against rebuild cost with whatever band the terms allow. Union adds a duty to report a reconstruction that raises the sum by 15 percent or more, or the guarantee lapses. Read together with the calculators above, the practical rule is: accept the carrier's computed sum only with verified inputs, keep indexation running, and check the total-loss cap separately for a flat in a city, because indexation by a construction index will not close a market gap.

A working order for setting the sum follows from all of this. Identify the value basis the terms name for the property type. Measure the area on that carrier's definition, not on the number in the advertisement. Compute rebuild cost from unit cost times coefficients, or take the carrier's calculator with verified inputs. For a flat whose terms say market value, compare the sum with a current market value and with 115 percent or 100 percent of the sum, whichever cap applies. Index every year and keep the evidence of the inputs. Bytero produces the rebuild and market figures for an address in one request, with the area on each carrier's own basis, through Single Input Quote; availability by market is on the coverage page.

Questions

Is a flat underinsured if the sum insured is below its market value?

It depends on the clause, not on the gap. Under Union's terms the reduction test compares the sum with the new (rebuild) value, so a sum below market value cuts nothing on a partial loss; the market gap bites only on a condemned block, where the payout is market value capped at 115 percent of the sum. Under terms that name market value as the insured value with no tolerance, the same gap cuts every claim proportionally.

Should the sum insured be rebuild cost or market value?

Whatever the policy names. Houses are on rebuild cost at every carrier reviewed. For flats, seven of nine carriers write market value or the higher of market and rebuild, and three keep rebuild cost. The calculators mostly prefill a rebuild-type figure regardless, so the choice is often made for the customer without being stated.

What is proportional reduction?

If the sum insured is lower than the insured value at the time of the event, the payout is reduced in the ratio of sum to value, on every claim, not only a total loss. Czech law makes it the default (§ 2854), Slovak law today does not regulate it, and the Slovak draft code would introduce it as the default from 1 July 2027 with no tolerance.

Does over-insuring help?

No. The payout is limited to the value of the insured thing immediately before the event, so a sum above value buys nothing except a higher premium. The draft Slovak code adds a 10 percent band and a right to rebalance the contract.