Definition of the insured capital, in the field of insurance, is the maximum limit of compensation in the event of a claim. Said amount arises from the agreement between the insurance company 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 benefiting from the coverage is taken as a reference.
Likewise, 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 be mandatory in the contract.
Secured capital and interest
As far as possible, there should be a match between the principal and the insured interest. The latter is the economic value affected by the occurrence of a risk.
If an asset is being protected, the insured interest is estimated after the loss. To do this, an appraisal is carried out.
Otherwise, if it is a life insurance, the insured interest is determined 'a priori' when drawing up the contract.
Overinsured and underinsured
If the insured capital is greater than the insured interest, we are in a situation of overinsurance. In other words, the limit amount of the coverage exceeds the valuation of the damages. Therefore, the insurer will not disburse the maximum compensation, but up to the amount that allows the damage to be repaired.
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 $ 2,000 artwork is covered for $ 1,000. So, if a claim is made and the damages are US $ 1,000, the insurer will compensate proportionally for US $ 500, that is, for 50% of the 'limit value'.