Wert 1914 as base value in building insurance

The 1914 value, also known as the 1914 value or 1914 building insurance value, is the basic value in buildings insurance. This theoretical value is used to determine the sum insured and the corresponding insurance premium for buildings insurance.

Below we explain everything you need to know about the value of 1914.

The 1914 value in the building valuation

The building insurance value 1914 is a fictitious calculated value in the insurance industry that serves as a uniform basis for determining the sum insured and the insurance premiums. Let’s assume that a fire in a residential building results in a total loss. In this case, the building insurance will reimburse the policyholder for the costs of rebuilding the property. However, the reimbursement of costs is largely dependent on the insured value specified in the insurance policy (sliding replacement value, new value or current value).

The sliding replacement value has become established in the insurance industry as the most common method for determining the 1914 building insurance value. The central value in this valuation procedure is the value in 1914, with the year 1914 being used as the basis for the calculation. Why this particular year? Because 1914 was the last year in which building prices in Germany were stable and the currency was also backed by numerous gold reserves. Inflation then set in and construction prices and the stability of the currency began to falter.

It is important to know that the 1914 value indicates what a building to be insured would have cost in gold marks (M) in 1914.

Determine building value in 1914

To calculate the 1914 value, certain information about the building to be insured is required. These include

• Type of building (e.g. residential or ancillary building, residential or commercial building, office building)
• Building extension (including loft conversion, number of storeys, basement location)
• Building equipment (quality of exterior walls, roof, windows, doors, floors, etc.)

The 1914 value is not available

First of all, there is always a way to determine the value in 1914.

In various cases, the policyholder may not have the 1914 value. This may be because the policyholder does not know the new construction value of his property for any given year or because he does not have the building price index for the year in question. These conditions can make it difficult to calculate the 1914 building insurance value, but this does not preclude the conclusion of a building insurance policy.

In many cases, it is sufficient for the insurer to know the new construction value of the property for a particular year, as this value can be used to estimate the value in 1914. However, as the new construction value includes discounts and personal contributions, this can result in incorrect values. For example, the new-build values often do not match the costs that are due in the event of an insurance claim. The valuation is often carried out by a (building) expert or together with the insurer.

In this case, the liability for the valuation is transferred from the policyholder to the surveyor or the insurer. If a building insurance policy already existed for the property, the value in 1914 can usually also be taken from the old insurance policy. However, this often no longer corresponds to the actual circumstances, as conversion measures or structural adjustments (e.g. modernization) may have been carried out in the meantime.

The easiest way for building insurers and insurance brokers to carry out a building valuation or determine the 1914 value is to use the Wert14 tool from SkenData.

Moving replacement value factor

In addition to the 1914 value, there is another important factor in buildings insurance – the sliding replacement value factor. It is used by insurance companies to calculate the insurance premium for the relevant building insurance policies, but is not binding and can be adjusted by insurers depending on the economic situation.

The German Insurance Association (GDV) calculates the sliding replacement value factor annually, taking into account the construction price index and the standard wage index for the respective construction industry. As most insurance claims are not total but partial losses (e.g. due to storms or water damage), labor costs are more important. For this reason, the standard wage index in the construction industry is taken into account with 20 percent in the sliding replacement value factor. For this reason, the sliding replacement value factor is always at least three points higher than the value of the construction price index.

Premium amount = 1914 value × sliding replacement value factor × premium rate

The contribution rate is set by the respective insurers and can be viewed in their documents.

New construction value and market value

The construction price index, which is published annually by the Federal Statistical Office (Destatis), is necessary to determine the 1914 value. This is because only with the help of the construction price index can the 1914 value be converted in such a way that the new construction value can be determined for any given year.

Value 1914 = new construction value ÷ (construction price index ÷ 100)

It is important to note that the new construction value is by no means the same as the market value. The new construction value indicates the amount that would have to be paid to rebuild a property in the same condition after a total loss (e.g. due to a fire). The new construction value is determined by the information provided by the policyholder. In contrast to the sliding new construction value, on which insurers grant underinsurance as a condition, no underinsurance waiver is guaranteed on the new construction value.

The new build value is therefore an important key figure, especially for the policyholder and the insurance broker, in order to determine the sum insured and the corresponding insurance premium.

The market value, on the other hand, describes the amount that the insured building could fetch if sold on the open market. The new-build value and the market value are often significantly different. This can be the case, for example, if a property is spacious and furnished to a high standard, but the location is rather unfavorable. In this example, the new-build value could be EUR 450,000.00, but the market value only EUR 300,000.00 due to the less attractive location. If the market value were taken as the basis for the insured value, there would be extreme underinsurance in this case.

The correct determination of the new construction value of the insured property is extremely important for determining the sum insured and the insurance premium. For this reason, building insurance policies are reviewed annually and adjusted if necessary. If the building insurance value 1914 were not regularly checked by the insurance company (e.g. with Wert14), there would be a risk of underinsurance.

Development of the construction price index in Germany

The following table shows that the construction price index has risen almost constantly in recent years.

Source: Destatis (2021). Construction price indices. New construction (conventional construction) of residential and non-residential buildings including VAT. Original value 2015 = 100 https://www.destatis.de/DE/Themen/Wirtschaft/Konjunkturindikatoren/Preise/bpr110.html