Home Insurance: What It Covers and How It Differs from Property Insurance

Quick Overview

What is the difference between home contents insurance and property insurance? Simply put: home contents insurance protects the items you have in your home, while property insurance protects the apartment or house itself and its structural components. Therefore, a homeowner generally needs both types of coverage, while a renter primarily needs coverage for their personal belongings and, if necessary, liability insurance.

If you are unsure whether your insurance policy actually protects your property as you expect, or if the insurance company has refused to pay your claim, we can help you review the policy terms and determine the next steps.

Imagine you come home from work to find a broken lock, open drawers, and an empty space where your TV used to be. You have home insurance, so you expect the insurance company to cover the damage. But the policy is fifteen years old, the theft coverage limit has long since failed to match the value of your belongings, and a dispute over the insurance claim begins. It is precisely at such a moment that the difference between “having insurance” and having it set up correctly becomes apparent.

The legal framework for home insurance is based on the Civil Code, which governs the formation and content of insurance contracts. By entering into this contract, the insured commits to fulfilling certain obligations, which are typically specified in the policy terms and conditions. Among the insured’s most important obligations are the duty to notify the insurer of the occurrence of a loss event without undue delay, to take reasonable steps to prevent further damage (such as shutting off the main water supply in the event of a flood), to allow the insurance company to investigate the damage, and to provide the necessary cooperation. It is also essential to inform the insurance company of any relevant changes that may affect insurance coverage, such as renovating an apartment or changing one’s place of residence. Failure to comply with these obligations may result in a reduction or even denial of insurance benefits.

What is the difference between home contents insurance and property insurance?

One of the most common mistakes people make is confusing home contents insurance with property insurance. However, these two products cover completely different things. Simply put:

• Property insurance covers the building itself—that is, the walls, roof, floors, windows, radiators, and chimney.
• Home contents insurance, on the other hand, covers what you “bring” into your apartment or house—furniture, electronics, clothing, a bicycle, books, paintings, and even items in the basement or on the balcony.

Not having home contents insurance can therefore end up costing you a lot more. And not just in the event of theft, but also in the event of a fire, a burst washing machine hose, or water leaking from a neighbor’s bathroom.

How it works in practice:

Imagine Mrs. Hana, who lives on the fourth floor of a prefabricated apartment building. She went to visit her parents over the weekend. On Sunday evening, her downstairs neighbor called to say that the drains were probably clogged, because water was pouring through the ceiling into her neighbors’ apartments. When she returned, she found her apartment in shambles—a swollen laminate floor, a ruined carpet, and a kitchen cabinet that had come loose. Unfortunately, she didn’t have home insurance. She had to pay for the damage out of her own pocket and, on top of that, compensate her neighbors for their losses.

In contrast, Mr. Radim, who lives in the same building, had a well-structured insurance policy covering 800,000 crowns, including liability coverage. When his daughter accidentally dropped a hair dryer into the sink and caused a short circuit, the insurance company paid not only for new electrical wiring but also for the neighbor’s dryer, which had been destroyed by the electrical surge.

From legal practice: In disputes with insurance companies, it often turns out that the problem isn’t the existence of the policy itself, but the interpretation of specific policy terms. For example, disputes often arise over whether an event actually fell under the agreed-upon coverage, whether the insured met the security requirements, or whether the insurance company had the right to reduce the insurance payout. That is why it is important to consider not only the amount of coverage but also the exact wording of the contract and the exclusions.

What does home insurance cover?

Basic home insurance covers damage caused by natural disasters —fire, explosion, lightning strike, windstorm, hailstorm, flood, water leakage, snow load, or the fall of a tree or vehicle. It may also cover damage caused by water from plumbing fixtures, power surges, vandalism, or theft.

But be careful with theft— every insurance company has its own definition of “break-in.” If the thief leaves no signs of forced entry, the insurance company may not pay out anything. For example, if you forget to close a window and the perpetrator gets inside without using force. Most risks can be covered by additional insurance. For example, for more expensive appliances or works of art, the insurance company may require an inventory, photographic documentation, or an expert appraisal.

Always read the policy thoroughly so you know exactly what is covered. Always read the General Insurance Conditions (GIC). That’s where the important details are hidden.

Insurance Exclusions: When Will the Insurance Company Not Pay?

Just because you have home insurance doesn’t automatically mean that every claim will be paid. The insurance terms and conditions include a number of exclusions—that is, situations in which the insurance company may not pay out.

The most common exclusions: unlocked doors, open windows, gross negligence (e.g., a forgotten candle), damage caused intentionally or under the influence of alcohol, valuables not stored in a safe, unauthorized entry into the premises (e.g., a basement you share with other tenants).

Beware of underinsurance—payouts may be reduced

Another common pitfall is an incorrectly chosen coverage amount. If you insured your household years ago and have since furnished it with new furniture, a computer, a TV, and a coffee maker worth 40,000, but the insured amount has remained the same, the insurance company will pay only a proportionate share in the event of a claim.

For example, if the value of your household is 1 million CZK but your insurance coverage is only for 500,000 CZK, the insurance company will pay you only half of the loss, even if the damage amounts to 200,000 CZK.

The solution is to regularly update your policy and set up “indexation”—that is, an automatic increase in the insured amount based on inflation and the rise in the value of your property. At the same time, carefully calculate the value of all your belongings and consult an expert or insurance broker to determine the appropriate coverage amount.

Liability: A Small Insurance Policy, a Big Relief

You know how it goes—your child knocks over an aquarium while visiting the neighbors, your dog jumps at a passing cyclist, or a key falls out of your bag and someone uses it to break into your basement. Liability insurance, which is often included in home insurance, can save your family’s budget in these situations.

It also comes in handy for everyday accidents—flooding a neighbor’s home, breaking someone else’s cell phone, or damaging merchandise in a store. Coverage limits typically range from 1 to 10 million crowns, and the annual premium is a drop in the bucket compared to the potential cost of damages.

Is home insurance necessary if you’re renting?

A common misconception among renters is: “The apartment isn’t mine, so I don’t need insurance.” Wrong. While the landlord may have the property insured, no one else will protect your furniture, clothes, electronics, and other belongings.

Furthermore, rental agreements often include a clause stating that the tenant is liable for any damage caused to the apartment. So if you accidentally flood the floor or destroy the kitchen cabinets, you’ll have to pay for it all out of your own pocket. However, if you have home insurance, it can completely shield you from such expenses.

What should you watch out for when taking out a policy?

• Insured amount —it shouldn’t be underestimated.
• Scope of coverage —what it includes (and what it doesn’t).
• Limits and exclusions —for example, for electronics, jewelry, and cash.
• Security requirements —security locks, bars, and alarms.
• Indexation – regular updates based on price trends.
• Option for online management or a mobile app —for reporting claims and managing your policy.

What to Do If the Insurance Company Refuses to Pay a Claim?

If the insurance company refuses to pay a claim or reduces the payout, first request a detailed written explanation and compare it with the insurance policy and the terms and conditions. You can file an objection or request a review of the decision with the insurance company.

In disputes involving home insurance, you cannot turn to the financial arbitrator, as the arbitrator does not resolve disputes related to non-life property insurance. Depending on the nature of the dispute, you can use one of the options for out-of-court resolution or, if necessary, pursue your claim in court.

If the insurance company has denied a claim or paid you less than you expected under the contract, we can review its justification, the policy terms, and whether the reduction was justified.

Summary

Home contents insurance primarily protects the contents of an apartment or house, while property insurance covers the building itself and its fixed components. What home contents insurance covers is always determined by the specific policy, the agreed-upon risks, limits, and exclusions. Typically, it can protect your belongings against the consequences of fire, water damage, theft, vandalism, or other agreed-upon events. It is important to set the correct coverage amount and update it regularly to avoid underinsurance. For renters, it also makes sense to address liability for damage caused to the landlord or neighbors. If the insurance company refuses or reduces coverage, request a written explanation and verify whether its actions comply with the contract and the Civil Code.