Square Meter Method (Quadratmeter-Methode)

Concept

The square meter method is a simplified procedure for determining the insured value of a residential building, under which the building’s living or usable floor area is multiplied by a per-square-meter price set based on region and year of construction, in order to derive the appropriate sum insured.

Relevance for Avoiding Underinsurance

Correctly determining the sum insured is of central importance, since a sum insured set too low can, in the event of a loss, trigger application of the proportionality rule, under which the indemnity is reduced in proportion to the ratio of the actual sum insured to the sum insured that would have been required (underinsurance); the square meter method is intended to reduce this risk through a standardized, traceable valuation.

Distinction from Other Valuation Methods

As an alternative to the square meter method, the insured value can also be determined using the so-called 1914 value, a historical reference system with a sliding adjustment factor, or through a detailed individual appraisal of the building based on actual construction costs; many insurers also offer a contractual waiver of the underinsurance defense, provided the sum insured was properly determined using one of these recognized methods.