The normal fire or houseowners and householders policy indemnifies the insured against loss. This means that the insured will receive only market value for damage to the improvements by the risk insured against. The principles of indemnity are:

Overinsurance is expensive but by underinsuring, the insured runs the risk of insufficient compensation because if the insurance contract has a subject to average clause. Indemnity insurance is becoming less popular being replaced by reinstatement insurance.

Under an indemnity policy you insure your home for its indemnity value. The indemnity value is the replacement value less depreciation or market value of the building(s). When you renew an indemnity policy you must insure your home for its replacement value less a reasonable allowance for depreciation based on the age and condition of the home. If you do not insure it for this amount, we may refuse a claim or cancel this policy, or do both.

You should work out how much it would cost to totally rebuild your home and all the home improvements on the site   and then you apply depreciation to this figure based on the age and condition of your home.

The best way to determine the indemnity value of your home is to obtain a valuation from a qualified valuer. The valuer will charge you a fee when they value your home. He/she will determine how much your home has depreciated according to market principles. This beyond the scope of the layperson.