Sum insured (pojistná částka)
The upper limit of the insurance benefit agreed in the policy. For property insurance it should match the new (reinstatement) value of the building, meaning the cost of rebuilding it to the same extent and quality, not the market price with land and location. If the sum insured falls short of the building's real value (underinsurance), the insurer cuts the benefit proportionally.
Example
A flat bought for CZK 6,000,000 with a CZK 4,000,000 mortgage (5.00 %) has reinstatement costs of, say, CZK 3,500,000. Insure it for CZK 6,000,000 and you overpay the premium. Insure it for CZK 1,750,000 and it is underinsured by half: on damage of CZK 400,000, the insurer would pay only about CZK 200,000.
In practice
Banks usually want the sum insured to cover the value of the building according to the valuation, sometimes at least the loan amount; the exact requirement is in the loan agreement. Raise the sum insured from time to time or agree on indexation, as construction costs keep rising. Copying the market price from the purchase contract means paying premiums on the land and the location as well, neither of which can burn down.
How it differs
The premium (pojistné) is what you pay for the insurance; the sum insured is the most you can receive. Compared with the collateral value from the valuation, it leaves out the land and the market premium for the location, which is why a flat's collateral value is usually higher.
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