First Loss Policy

Some property insurance policies come with a “first loss” option (or "first loss cover"). In this arrangement, the policyholder and the insurer agree to insurance coverage which is lower than the actual value of the insured property.

Benefits for this partial coverage are normally much lower than the policy’s full sum insured. In the event of a loss, the insurance company pays out benefits in keeping with the pre-agreed maximum coverage for that category. This applies even if you are under-insured.

Supplementary “simple theft away from home” policies are a classic example of first-loss coverage. Other types of insurance, such as water damage coverage or insurance against theft-related losses at home can also be insured on a first-loss basis. A first-loss policy may have lower premiums than a policy which covers your property’s full value.

It’s worth noting that first-loss policies may come with a deductible. In that case, the insurance covers the difference between your deductible and the maximum benefit you chose.

Example of first-loss household insurance: Your household’s property is valued at 125,000 francs. Your first-loss policy has a maximum benefit of 100,000 francs, or 80 percent of your property’s value. In this case, you would be under-insured and in the event of a total loss, your policy would only cover 80 percent of losses.

However, if you are also insured against external theft (on a first-loss basis), you will still be compensated for 100% of eligible losses, minus your deductible and up to the maximum benefit.

More information:
Simple theft away from home
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Expert Benjamin Manz
Benjamin Manz is CEO of moneyland.ch and an independent expert on banking and finance.