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 the property certificate can do the math and determine the value to be insured based on the property's construction areas. These are the calculations that companies make in the event of claim assign a value to the property, because it is a simple, easy, and inexpensive method.
The problem is that if there is a serious problem, such as the fire that destroyed Cascais Atrium in 2016, the values determined by the expedited method may not be sufficient to rebuild the property, since they were the values for low-quality municipal buildings.
There are real estate experts, knowledgeable and validated by the CMVM (Portuguese Securities Market Commission) to do their job, who can make this assessment and take on this responsibility.
By 2025, low-quality properties are being valued at €1,100/m², while those of average quality are being valued between €1,400/m² and €1,600/m².
I would like to point out that it is the policyholder who determines the capital to be insured, which must be decided at a meeting in accordance with Article 1429 of the Civil Code.
You can use our Excel spreadsheet to calculate the expedited method for your condominium.
In the case of an individual unit, we recommend the simulator for calculating the reconstruction cost of houses or units (SCRIM).
We are available for any clarification you may require.