Criteria for fire insurance value
The fire insurance value covers the value of materials in buildings that may be lost or damaged by fire and is based on the cost of the construction work, taking into consideration the age, maintenance and overall condition of the property, plus the expense of clearing the fire debris. VAT is calculated for all building costs attendant to the fire insurance appraisal, except for work carried out on the construction site of residential houses, in which case the part of the VAT that is reimbursable is deducted (60%).
Fire insurance value is recalculated annually but updated monthly in accordance with changes in the construction cost index. Information on the construction cost index can be found at the website of Statistics Iceland. The annual recalculation of the fire insurance value takes into account the changes in construction cost for various types of buildings in the previous year, taking normal maintenance and depreciation into account.