Spain: Household Insurance

Overview

Household insurance (seguro de hogar) in Spain generally includes the building, its contents and third party liability, all of which are contained in a multi-risk household insurance policy. Policies are offered by Spanish and foreign insurance companies and premiums are similar, although foreign companies may provide more comprehensive cover.

Building

Although not compulsory, it’s wise to take out property insurance that covers damage to a building (continente) due to fire, smoke, lightning, water, explosion, storm, freezing, snow, theft, vandalism, malicious damage, acts of terrorism, impact, broken windows and natural catastrophes (such as falling trees). Insurance should include glass, external buildings, aerials and satellite dishes, gardens and garden ornaments. Note that if a claim is the result of a defect in building or design, e.g. the roof is too heavy and collapses, the insurance company won’t pay up (yet another reason to have a survey before buying!).

Property insurance is based on the cost of rebuilding your home and should be increased each year in line with inflation. Make sure that you insure your property for the true cost of rebuilding. It’s particularly important to have insurance for storm damage in Spain, which can be severe in some areas. If floods are one of your concerns, make sure you’re covered for water coming in from ground level, not just for water seeping in through the roof. Always read the small print of contracts. Note that if you own a home in an area that has been hit by a succession of natural disasters (such as floods), your household insurance may possibly be cancelled.

Contents

Contents (contenido) are usually insured for the same risks as a building (see above) and are insured for their replacement value (new for old), with a reduction for wear and tear for clothes and linen. Valuable objects are covered for their actual declared (and authenticated) value. Most policies include automatic indexation of the insured sum in line with inflation. Contents insurance may include accidental damage to sanitary installations, theft, money, replacement of locks following damage or loss of keys, frozen food, alternative accommodation cover, and property belonging to third parties stored in your home. Some items are usually optional, e.g. credit cards, frozen foods, emergency assistance (plumber, glazier, electrician, etc.), redecoration, garaged cars, replacement pipes, loss of rent, and the cost of travel to Spain for holiday homeowners. Many policies include personal third party liability, e.g. up to €300,000, although this may be an option.

Items of high value must usually be itemised and documentation (e.g. a valuation) along with photographs provided. Some companies even recommend or insist on a video film of belongings. When claiming for contents, you should produce the original bills if possible (always keep bills for expensive items) and bear in mind that replacing imported items in Spain may be more expensive than buying them abroad. Contents’ policies contain security clauses and if you don’t adhere to them a claim won’t be considered. If you’re planning to let a property, you may be required to inform your insurer. Note that a building must be secure with iron bars (rejas) on ground-floor windows and patio doors, shutters and locks. Most companies give a discount if properties have steel reinforced doors, high security locks and alarms (particularly alarms connected to a monitoring station). An insurance company may send someone to inspect your home and advise on security measures. Policies pay out for theft only when there are signs of forced entry, and you aren’t covered for thefts by a tenant (but may be covered for thefts by domestic staff). All-risks policies offering a worldwide extension to a household policy covering jewellery, cameras and other items aren’t usually available from Spanish insurance companies, but are available from a number of foreign companies.

Community Properties

If you own a property that’s part of a community development, the building is usually insured by the community (although you should ensure that it’s comprehensively insured). You must, however, be insured for third party risks (riesgo a terceros) in the event that you cause damage to neighbouring properties, e.g. through flood or fire. Household policies usually include third party liability up to a maximum amount, e.g. €300,000.

Holiday Homes

Premiums are generally higher for holiday homes, due to their high vulnerability, particularly to burglaries. Premiums are usually based on the number of days a year a property is inhabited and the interval between periods of occupancy. Cover for theft, storm, flood and malicious damage may be suspended when a property is left empty for an extended period. Note that you’re required to turn off the water supply at the mains when vacating a building for more than 72 hours. It’s possible to negotiate cover for periods of absence for a hefty surcharge, although valuable items are usually excluded (unless you have a safe). If you’re absent from your property for long periods, e.g. longer than 30 days a year, you may be required to pay an excess on a claim arising from an occurrence that takes place during your absence (and theft may be excluded). Where applicable, it’s important to ensure that a policy specifies a holiday home and not a principal home. In areas with a high risk of theft (e.g. major cities and most resort areas), an insurance company may insist on extra security measures. It’s unwise to leave valuable or irreplaceable items in a holiday home or a property that‘s vacant for long periods. Note that some insurance companies do their utmost to find a loophole that makes you negligent and relieves them of liability. You should ensure that the details listed on a policy are correct, otherwise your policy could be void.

Insuring Abroad

It’s possible and legal to take out building and contents insurance in another country for a property in Spain (some foreign insurance companies offer special policies for holiday homeowners), although you must ensure that a policy is valid under Spanish law. The advantage is that you have a policy you can understand and you’re able to handle claims in your own language. This may seem like a good option for a holiday home, although it can be more expensive than insuring with a Spanish company and can lead to conflicts if, for example, the building is insured with a Spanish-registered company and the contents with a foreign based company. Most experts advise that you insure a Spanish home and its contents (continente y contenido) with a Spanish insurance company through a local agent.

Rented Property

Your landlord usually insists that you have third party liability insurance. A lease requires you to insure against ‘tenant’s risks’, including damage you may cause to the rental property and to other properties if you live in an apartment, e.g. due to a flood, fire or explosion. You can choose your own insurance company and aren’t required to use one recommended by your landlord.

Premiums

Premiums are usually calculated on the size (constructed area in square metres) of a property, its age, the value of the contents and security protection, e.g. window protection at ground level, the number of entrance doors and their construction. As a rough guide, building insurance costs around €10 a year per €5,000 of value insured, e.g. a property valued at €60,000 will cost €120 a year to insure. Contents insurance costs from around €15 a year per €5,000 of value insured (e.g. a premium of €30 for contents valued at €10,000) and may be higher for a detached villa than an apartment, e.g. up to €20 per €5,000 insured. Detached, older and more remote properties often cost more to insure than apartments and new properties (especially if located in towns), due to the higher risk of theft.

Claims

If you wish to make a claim, you must usually inform your insurance company in writing (by registered letter) within two to seven days of an incident or 24 hours in the case of theft. Thefts should also be reported to the local police within 24 hours, as the police report (denuncia), of which you receive a copy for your insurance company, constitutes irrefutable evidence of your claim. Check whether you’re covered for damage or thefts that occur while you’re away from your property and are therefore unable to inform the insurance company immediately.

Take care that you don’t under-insure your house contents and that you periodically reassess their value and adjust your insurance premium accordingly. You can arrange to have your insurance cover automat¬ically increased annually by a fixed percent¬age or amount. If you make a claim and the assessor discovers that you’re under-in¬sured, the amount due is reduced by the percentage by which you’re under-insured (e.g. if you’re insured for €5,000 and you’re found to be under-insured by 50 per cent, your claim for €1,500 is reduced by 50 per cent to €750).

© Survival Books Limited 2005

“Buying a Home in Spain 2006” 5th Edition, David Hampshire.

Reproduced with the permission of Survival Books Limited.

Further information on this topic can be found in “Buying a Home in Spain 2006” 5th edition, by David Hampshire.

For extensive, annually updated information about buying a property in Spain, you can purchase this book at www.survivalbooks.net