Charakteristics and significance of the sum insured in the Czech Republic

The sum insured of insured assets is one of the basic significant characteristics of insurance policy quality and is the ceiling amount of insurance benefit in the case of an insured loss. It is one of the parameters specified in the policy and affects the premium amount. The sum insured relates to the insured value of the asset. It is the highest possible loss which can occur to an insured loss and it is decisive for determining the sum insured. The policy holder determines the sum insured so that it corresponds to the insured value of the insured asset at the time of insurance policy signing. The policy holder is fully liable for setting the sum insured. The aim of this paper was to analyze the quality of the underwritten insurance according to the determined sum insured. Source data for the paper included critical analysis of literature based on valid Czech legislation and on general terms and conditions of insurance of individual insurance companies. The paper contains an analysis and comparison of types of insured values of assets for insurance needs on the Czech insurance market. An induction method applied to a real-life insurance case was used for explanation of the relationship between the sum insured and paid-out insurance benefit. The paper clarifies the significance and characteristics of the sum insured in the Czech Republic. The conclusion is that viewing insurance only from the angle of the premium amount is completely incorrect. Savings on the premium at the expense of reduction of the sum insured implies a risk of not renewing company operations or a living in a family house in case of an insured loss.