We have received many inquiries from condominium administrators on this subject and will try to clarify the matter.
As this is a relevant topic, we decided to create this article ina question-and-answer format to make it easier to read.
How should multi-risk insurance be taken out? What is insured capital and what should be taken into consideration?
The calculation of multi-risk insured capital for a building must take into account the total reconstruction value of the building, including all costs necessary for its reconstruction in the event of claim. This amount must be sufficient to cover not only the construction of the building itself, but also the facilities, equipment, furniture, and other elements that are an integral part of the building.
What is the amount to be insured?
The answer is very simple, but it raises many questions. The answer is the reconstruction value. That is the maximum amount the company will pay if there is a problem, a claim, but what is that amount?
The reconstruction value is the value, including all costs, such as architects, licenses, etc., that will be necessary to rebuild the property.
And how is this value calculated?
This is where things get complicated. Ideally, the builder should indicate this value, ignoring the speculative value of the land, because whatever happens, the land will remain there.
It is often not possible to obtain this information from the builder because the property is no longer new. In this case, you can consult a real estate appraiser. These types of experts, who are registered with the CMVM (Portuguese Securities Market Commission), can perform this calculation and determine the reconstruction value. We know some good experts who specialize in this area.
There is also an index that insurance company experts use to check for insufficient capital in policies, called the expedited method, but this value does not match the reconstruction value unless it is a very large coincidence.
This index is obtained by a decree that has not been published since 2013 and was used to define construction costs at controlled costs. Well-built buildings have a higher value, while poorly built buildings have lower values, but this index does not take any of this into account. This index for Greater Lisbon and district capitals has been updated in line with inflation to €945.66/m² for 2026.
But today it is normal to insure properties with a good standard of construction for between €1,200/m² and €1,500/m². Companies pay higher amounts than the index values, provided that the reconstruction value is actually higher.
The insured capital is defined by the policyholder, who is responsible for determining the amount of capital they wish to insure and may change it at any time.
The insured capital value should therefore not be calculated based on the mandatory minimum of €945.66/m², but rather on an accurate assessment of the total reconstruction value of the building. It is recommended that this assessment be carried out by an expert specializing in property valuation, who will be able to provide a more accurate and appropriate value for insurance coverage.
As for the question of claim the company will pay the claim the insured capital is set at €1,500/m², it is important to remember that the coverage amount should be based on the total reconstruction value of the building and not on a specific area measurement. Therefore, the insured capital amount should not be calculated based solely on the area of the building.
In summary, the value of multi-risk insurance for a building should be calculated based on an accurate assessment of the total reconstruction value of the building, taking into account all costs necessary for its reconstruction in the event of claim. It is important that this value is adequate and sufficient to ensure the necessary protection in the event of unforeseen events.
How is it calculated according to the expedited method?
Anyone in possession of a property title deed can perform the necessary calculations to determine the insured value. This is known as the expedited method, which insurance companies frequently use to determine the property’s reconstruction value in the event of claim, as it is a simple, quick, and cost-effective method.
However, it is important to keep in mind that, in the event of a major claim —such as the fire that destroyed the Cascais Atrium in 2016—the values determined using this method may not be sufficient to ensure the complete reconstruction of the property. These figures are based on construction costs associated with municipal properties or lower-quality buildings and do not necessarily reflect the actual costs of rebuilding a building with superior characteristics and quality standards.
For a more rigorous and appropriate appraisal, there are real estate appraisers who are duly qualified and recognized by the CMVM and who can perform such an appraisal and assume technical responsibility for it.
For 2026, the reference values used in the appraisal of properties of low construction quality are approximately1,100 €/m², while for properties of average quality, the values may range from1,400 €/m² to 1,600 €/m². These figures demonstrate the importance of aligning the insured amount with the true cost of rebuilding the property, thereby preventing situations where there is insufficient coverage in the event of a fire ( claim).
We also note thatthe determination of the amounts to be insured is the responsibility of the policyholder, and this decision must be made at a meeting of condominium owners, in accordance with the provisions of Article 1429 of the Civil Code.
For condominiums, you can use our Excel spreadsheet to calculate the insurance coverage using the expedited method, which provides a simple and practical estimate.
We also recommend using theReal Estate Reconstruction Cost Simulator (SCRIM), provided by APS, which applies to apartments, single-family homes, and properties under horizontal property regime—that is, condominiums. However, it is important to note a key limitation of this simulator: SCRIM considers only theGross Private Area (ABP), and therefore excludesdependent gross areas—such as open balconies, terraces, parking spaces, and storage rooms—as well ascommon areas, which are not included in the Gross Private Area.
Thus, although SCRIM is a useful tool for estimating the cost of rebuilding a unit, it is essential to ensure that, when determining the insured amount, all areas and elements that may represent an actual reconstruction cost are taken into account, in order to avoid any potential shortfall in coverage.
We are available to answer any additional questions or to assist you in determining the most appropriate insured values for each property.