Home insurance has become a basic necessity for many homeowners in Spain. No matter if you live in the house or rent it out, a proper insurance allows you to protect yourself from many risks associated not only with damage to the property, but also related to your civil liability.
Being a foreigner in Spain, sometimes it is not easy to understand all the details of local insurance market. In practice, we often face situations where the owner takes out an insurance policy when buying a home (most frequently the one offered by the bank where the account was opened), which is actually something contracted just “for a tick”, a policy taken out without careful analysis of the contents of the document. Sometimes, capitals and coverage are not agreed with the policyholder, and when an insured event occurs, the insurance does not meet the expectations. Insurance is in place, but in reality, it does not work and does not cover the risks that you are absolutely sure should be covered.
Let us focus on three most common mistakes that are made when taking out home insurance.
1. Inadequate indication of insured amounts for building and contents. This could be both underinsurance and over insurance.
Underinsurance refers to indicating the capital below the amount, which is actually subject to insurance. If upon insured event the insurance company establishes that the capital indicated in the policy is lower that the real capital, it will be considered as underinsurance and will affect the insurance payments. For example, as a result of a pipe burst, an expensive cupboard is damaged. Replacing the cupboard with a similar one costs €5,000. According to the insurance policy the contents are insured for €10,000. The insurance company sends an expert to the house to confirm that the cupboard cannot be repaired, replacement is required and the cost of a similar one is €5.000. The expert confirms that the cupboard indeed needs replacement and the price of a similar one is €5,000, however, he assesses that the total value of contents in the house is significantly higher than €10,000 stated in the policy and according to his assessment the total value of contents is €20,000. So, what‘s next? The insurance company states that only 50% of the personal belongings in the house have been insured under the policy, so they compensate only 50% of the damage accordingly, i.e. €2,500 instead of €5,000.
Over insurance. Most often we come across the over insurance in respect of building insurance, i.e. those elements of home that would stand in their place if some imaginative force would turn the house upside down. Often, the clients refer to the market value of their real estate indicating the purchase price (or even a higher one) in the policy, sometimes accepting the higher price of insurance. Doing so, they hope that if there is a big trouble, they will fully reimburse the money spent on the house. In fact, if an insured event occurs, the insurance company will not pay the market value, but will cover the costs of rebuilding the house of the same quality in the same place. The market value, apart from construction costs, is formed by many factors, such as location in a prestigious area, the view from the window, etc. But these factors have practically no impact on the cost of reconstruction of the house. When drawing up the policy, the insurance company or the insurance intermediary can advise you on the cost of building reconstruction basing on its type, area, quality and geographical location.
2. Lack of specification of the insured contents.
“I had contents insured for €30.000 and when my jewellery for €2.000 was stolen I didn’t receive any payment form the insurance company”. How is this possible? The insurance companies set limits on certain types of contents, particularly, jewellery and valuables objects (depending on the company these may include, for example, pieces of art, expensive sports equipment). When taking out insurance, it is necessary to specify which types of personal belongings will be considered valuable objects by the insurance company and which types of contents should be declared with more details. Moreover, it is necessary to clarify all possible restrictions that the policy may have.
In order to get an adequate compensation in case of an insured event, it is necessary to indicate capitals for each type of contents that imply a separate limit and, if necessary, provide additional information on the most valuable items (photos, purchase receipts, appraiser’s reports). In our example, it was necessary to indicate that €2.000 out of the declared €30.000 correspond to jewellery, or in addition to the personal belongings with the estimated value of €30.000, there is jewellery worth €2.000.
3. Incorrect indication of security measures in the house. When taking out insurance, you must specify whether your home has an alarm system connected to a central station, what kind of doors and locks you have in the house, whether there are grids on the windows, etc. Additional security measures in the house reduce the cost of the insurance, however, if, in fact, it turns out that at the moment the insured event happens, these measures are not in place, or do not function properly, the insurance company will reduce payments or reject the claim. For example, it is stated that there is an alarm system in the house, but it is not activated at the time when the burglary occurs. Or it is indicated that there is a reinforced front door, but it turns out that there is one more entrance to the house with a simple glass door through which a thief has entered. In such a case, it is possible that if these security measures were a prerequisite for issuing the insurance policy, the claim will be rejected.
An insurance policy which is drawn up correctly allows avoiding many problems with handling your claims, while correct indication of the insured amounts will guarantee an appropriate coverage without overpaying.
Being a professional insurance broker we would be glad to consult you on any questions regarding home insurance in Spain and will help you to get high-quality insurance at an attractive price without any additional fees for selection and issuance of the policy. Our phone number is 677455883, e-mail: info@justinsurance.es.
