Fire insurance value
Fire insurance value
Fire insurance value is the insurance amount of real properties on which the premiums for statutory fire insurance are based. The purpose of fire insurance is for a building’s owner to recover losses in case of fire in the building. The statutory fire insurance only extends to the property, not the home contents, location value or cost of finishing work on-site. Property owners must insure their home contents specifically if the fire insurance is to cover it. Article 4 of the regulation on the statutory fire insurance of real properties No. 809/2000 lists the building factors and other factors that an insurance must always cover and must be considered when assessing fire insurance value.
Public levies for all house owners, based on the fire insurance value, are collected along with the fire insurance premium. These levies include a pre-emptive charge that goes towards the Avalanche Fund, a catastrophe insurance charge that goes towards Iceland Catastrophe Insurance and a fire insurance appraisal charge that goes towards Registers Iceland.
The fire insurance value covers the value of materials in buildings that may be lost or damaged by fire and is based on the cost of the construction work, taking into consideration the age, maintenance and overall condition of the property, plus the expense of clearing the fire debris. VAT is calculated for all building costs attendant to the fire insurance appraisal, except for work carried out on the construction site of residential houses, in which case the part of the VAT that is reimbursable is deducted (60%).
Fire insurance value is recalculated annually but updated monthly in accordance with changes in the construction cost index. Information on the construction cost index can be found at the website of Statistics Iceland. The annual recalculation of the fire insurance value takes into account the changes in construction cost for various types of buildings in the previous year, taking normal maintenance and depreciation into account.
The house owner is required to request a fire insurance appraisal of a new property no later than four weeks after it is brought into use.
The house owner is required to request a revaluation of the fire insurance value if it may reasonably be believed that the property’s value has increased due to rebuilding or renovation, as it is in the interest of the owner, in case of damage, that the fire insurance value reflect the true insurance value.
If a house owner believes that the fire insurance value does not reflect the true value of the property, he/she can demand that the fire insurance value be reappraised.
The first fire insurance appraisal is at no cost to the house owner, but an organisation fee is subsequently collected. The organisation fee is 0.3% of the fire insurance value of a new building and goes towards the Organisation Fund. A revaluation of a fire insurance value is charged according to the price list of Registers Iceland (in Icelandic)