It doesn’t matter if you live in a rented or owned house: a home insurance will protect you in case your home – or the belongings in it – suffers any kind of loss. But are there any differences between homeowner’s and renter’s insurance?
The answer to this question is yes: homeowners and renters have different obligations under the law with regard to home insurance. For this reason, Kelisto wanted to offer readers the main discrepancies between these two types of policies. Take a look and find out how you will be protected in different situations, whatever the condition of your home.
If you live for rent
Unlike homeowners, renters are not required to take out any home insurance. However, it is normal for the landlord to insure only the building, i.e. the dwelling itself, leaving the tenant’s belongings unprotected.
For this reason, Kelisto recommends taking out a tenant’s insurance or, failing that, one of the cheapest home insurance policies on the market with good content coverage. In this way, in the event of a claim (for example, if your new TV suffers a short circuit due to an electrical problem) your belongings will be covered.
However, as far as the property itself is concerned, the owner will be obliged to take out an insurance policy for the building and pay the fees involved.
In case of damage resulting from a fire or water leakage, the owner is obliged to repair it. But it is different if the damage is caused by the tenant, for example, by leaving a tap running. In this case it is not the landlord’s responsibility and the tenant will have to pay for the damage, at which point the tenant’s rental insurance policy comes into play, if he has been careful.
In many properties it is the residents’ association that pays for a policy that covers problems with the roof, pipes or flooding. If the building is very old, the rental insurance of the flat does not always cover accidents caused by water (they involve a very high repair cost, and in some policies the coverage is not total).
Check what coverage your homeowners’ association insurance includes so that you do not duplicate those same coverages in your home insurance.
If you rent your house
If you are the landlord of the property, you are only obliged to take out fire insurance. However, it is worth checking out other coverage, such as protection against non-payment of rent.
The best way not to overpay with your home insurance is to take out the option that best suits your needs. To do this, you should compare and read the small print carefully, two tips that can save you up to 134 euros a year (or, in other words, more than 50%). With the current times, this is an amount to be taken into account.
If the property is owned by you
According to the Mortgage Market Regulation Act, homeowners are required to take out fire insurance. Financial institutions go beyond the Act and usually ask anyone applying for a mortgage loan to take out damage or multi-risk home insurance. They do so because the home is the guarantee of collection of the money lent by the entity.
However, should the client contract this insurance with the bank or with the bank that has signed the mortgage? Not necessarily. The client has the right to choose the insurance company, but if it does not coincide with the one proposed by the financial entity, the cost of the mortgage could increase notably.
For every product the client contracts, including the home insurance, the interest rate of his mortgage will be reduced, although it is convenient to do the math to see what works better: if he can freely choose the insurance company that offers him a cheaper insurance or if he can reduce the price of the mortgage. If you have already signed an insurance policy with the bank, remember that you can change it whenever you want, as long as you give two months’ notice before it expires.
Home insurance takes into account both the building of the house (roofs, walls, downspouts, common areas of the whole house, etc.) and the contents (personal belongings, furniture, appliances, etc.). The insurance required by law refers to the building, not to the floor or contents.
For its part, the bank is only interested in the building, and usually leaves it up to the customer to decide how much content to insure (which varies between 18,000 and 25,000 euros on average, depending on the institutions consulted).
In the policy, the value of the building has to be adjusted to the actual building value, not to the current market price of the property. In other words, the value of the building that you insure must be the price that an expert would pay for your home, not the price at which you could sell it on the market.
This is important because, if there is a claim, the insurance company will only pay the cost of reconstruction, which is much less than the cost of purchase. Conversely, insuring less of a building also means a cheaper policy, but you run the risk of having underinsurance.
As for the contents, it is the owner who chooses what he wants to insure. To do this, it is advisable to compile invoices for the goods to be included, as well as a description of them. And if you accompany them with a photograph, better, to demonstrate their condition. If you want to cover valuable objects, such as jewellery, you may have to pay for an additional policy to insure them in case of theft.