Property insurance: when can you do without it?

As we outlined in the introduction: insurance can be recommended to all property owners. It will provide financial protection against damage caused by natural disasters, fires, vandalism or other unexpected events. Property insurance is particularly important in areas with a higher risk of flooding or other natural disasters.

It is always important to choose the right type and extent of cover to suit the value of the property and the individual needs of the owner.

Insurance becomes compulsory, for example, when obtaining a mortgage, where the insurance company usually requires it as a guarantee against loss of value of the mortgaged property.

Insurance and mortgage

By compulsorily insuring the property for which the mortgage is granted, the bank protects its investment, because in the event of damage to the property, its value is preserved. This insurance then protects both the borrower and the lender at the same time. As a rule, the insurance must be taken out before the mortgage is approved and must be maintained for the entire duration of the mortgage loan.

The cost of the policy, if a mortgage is obtained, is based on the value of the property and the extent of cover. It is not necessarily more expensive than ordinary property insurance, but must meet the bank’s minimum cover requirements. Insurance is crucial to protect both the property owner and the bank in the event of unforeseen events such as natural disasters or fires. The bank will usually define the range of cover that the policy must necessarily cover, and you can take out a policy for other areas of interest in addition.

The insurance required by the bank relates to the property as such and not to the items brought into it. This is also why it is preferable to separate building and home insurance in these situations. While the bank will have “say” in your building insurance and you will have to discuss any changes with them, you will have complete flexibility in your home insurance and the power to change it whenever the situation requires.

The fundamental peculiarity of this mortgage is that you are insuring someone else’s property at the outset. However, this will change once the purchase has been made and registered with the Land Registry.

If you want to change the contract in a fundamental way, increase the insurance benefit or enter into a contract with another insurance company, you must discuss everything with the bank without fail. Without the bank, the existing policy cannot be cancelled as it is listed as a party to the contract. You will only be released from this obligation when the mortgage is paid off.

Insurance of construction under construction

It is also possible to insure a building under construction. This is recommended especially when the building is a significant investment and there is a risk of damage caused by, for example, adverse weather, vandalism or theft of building materials and equipment. As a result, construction under construction insurance provides protection for the investment throughout the construction process.

But how do you insure something where one week you find piles of bricks, the next week you find steel frames and profiles, for example, and generally the whole building is constantly changing dynamically? Moreover, it may not even be possible to secure it sufficiently for a certain period of time.

House under construction insurance usually covers damage caused by unforeseen events such as fires, floods, theft or vandalism. It is important to regularly update the sum insured to reflect the actual value of the investment. Insurance companies often offer flexible solutions that allow you to continuously adjust the insurance coverage according to the current condition and value of the building.

What does property liability insurance mean?

Property liability insurance protects the owner of a property against financial claims from third parties for damage caused in connection with that property. This includes, for example, accidents on the property or damage caused by falling objects from the property. If someone suffers damage and claims that the condition of your property is to blame, this insurance can protect you from financial claims and lawsuits.

Renters insurance

There is one significant, and very common, situation where insurance for a property you don’t own may be recommended. It is renter’s insurance for your home. In this case, however, it will typically be more about insuring the household, i.e. the items that the tenant has brought in. This includes furniture, books, jewelry, electronics, and other personal items. This policy can be highly recommended because in most cases, home or condo insurance by the landlord does not cover the tenant’s personal property or damage caused by the tenant. The homeowner may not even know what property is currently in their apartment. However, it may be advisable to clarify when negotiating a lease which party is insuring the apartment for what and to what specific extent.

In our law practice we have also encountered a situation where the landlord only laconically told the tenant that “the apartment is insured and he does not have to worry about anything”, which the tenant (admittedly somewhat naively and unthinkingly) understood to mean that all his property is insured as well. When thieves broke into the first-floor apartment and took the tenant, Mr Pavel, a computer and electronics worth 170 000, he expected that everything would be paid for from the insurance policy. However, it only covered the broken glass.

How can the insurance of an unauthorised room or building differ?

Insurance companies may view unlicensed properties as a higher risk due to potential safety or structural deficiencies. As a result, the cover offered may be limited or specific policy conditions may be required. It is important to consult with the insurer on these aspects and to specify the exact nature of the unauthorised room when arranging insurance.