Compulsory or voluntary? A very frequent question among clients and friends is whether it is compulsory to take out home insurance. The best answer would probably be: “not in principle, but it is highly recommended”. So let’s discuss when it might be compulsory and why it is advisable to take out home insurance.
What is covered by home insurance?
Through the homeowner’s policy we can provide coverage for:
- The building of the house: this is the fixed parts of the property (roof, partitions, floor, pipes, electrical network…). It is usually valued according to the size of the house and the type of dwelling (single-family, apartment…).
- The content: are the goods that we have in our house. We are talking about: the furniture, the television, our clothes, laptop, jewelry, cell phones…
- Civil liability: this guarantee covers damages that may be caused to a third party (water leaks, something falling out of the window, etc.).
Taking out homeowner’s insurance is intended to guarantee peace of mind to the owner or tenant who is otherwise assuming the risk of damage to both his own property and that of his neighbors.
Is home insurance mandatory or voluntary?
In this sense, home insurance is voluntary for both the owner of the home and the person who lives in it. The only case in which its contracting is mandatory is in the case of a home purchase with a mortgage loan. There, the law does make it compulsory, regulated in the Royal Decree 716/2009 that develops the Mortgage Market Regulation Law, and whose article 10 states:
The goods on which the mortgage guarantee is constituted must have an insurance against damages adequate to the nature of the same.
Despite this, what is not mandatory is that this insurance must be made with the banking entity. A European Directive in 2013, known as the “European Mortgage Directive” prohibited banks from making the granting of a loan conditional on the subscription of insurance with the entity. We talked about it calmly in the article of a few months ago, where we also reflected the difference in price of life insurance between a bank and a company.
Homeowner’s insurance statistics
According to data from a study by the ARRENTA Association, which promotes access to housing:
- Today, 30% of homes in Spain are uninsured . This is twice as much as years ago, due to the economic crisis. There are almost 8 million homes without insurance.
- Half of the homes that do have insurance have an inadequate or insufficient policy; therefore, in the event of a serious loss, not all of the property would be paid for.
- The loss ratio in the home insurance business is the highest in the market, second only to the automobile insurance business.
For all these reasons, we must understand the importance of taking out home insurance, since an unforeseen event can happen at any time. What we should be most concerned about is a possible burst pipe that may flood the floor below, since we do not know what may be in that house, being able to calculate that compensation in thousands of euros, when these policies exist from 100 € per year.
If you want us to help you find the right home insurance for you, call or contact us. We have what you need.
