HomeFINANCEhow to choose the most suitable for you

how to choose the most suitable for you

when we talk about home insurance We talk about protection for all unforeseen events. It includes mandatory fire insurance for buildings on horizontal property, but it can also include multi-risk insurance, which is only mandatory if you apply for a bank loan to purchase your home.

However, as multi-risk insurance covers a wide range of situations (including fire), hiring it is advisable in all homes.

But the most important thing is to choose the home insurance that best suits your needs, both in terms of coverage and price.

Home insurance: how to choose?

If your property is an apartment in a building on horizontal property, you will have to take out fire insurance, or, more specifically, “Fire and Elements of Nature”. But, as we said, multi-risk insurance is more comprehensive. Let’s look at each of the options so you can make an informed decision.

Fire insurance: how does it work and what are the coverages?

Fire insurance, which is mandatory by law, must be taken out by the property owner and covers the risk of damage caused by fire. It must cover not only the respective fraction, but also the common parts of the building. If the owner does not hire it, the condominium administrator will do it, and this amount will be reimbursed later.

Its contracting can be autonomous or included in a multi-risk insurance.

Fire insurance coverage

This insurance covers damage caused by fire to the elements included in the plans of the autonomous fraction (walls, crockery, built-in furniture) and common parts.

The damage may have been caused by fire, heat, smoke, steam or explosion, by the means used to fight the fire or removal or destruction by firefighters, police, etc. in rescue actions.

Multi-risk insurance: main coverages

Multi-risk insurance is, as we said, more comprehensive. It covers not only other risks besides fire on the building, but also on the contents of the dwelling.

Although it is only mandatory if you use a home loan, given its scope, you should hire this home insurance to guarantee your security against any unforeseen event that happens to your property. And regardless of whether you have a home loan or not.

If you have a flood and you don’t have this insurance, all damages caused to your home and even that of your neighbors will have to be borne by you. It is a strong reason to take out this insurance for your property, be it permanent housing, holiday home or even intended for rent).

In addition to the pre-determined coverage, common to most of these insurances, whichever insurance company sells it may additionally add some additional and optional coverage for damage to the property or its contents. It may also include liability coverage.

Multi-risk insurance coverage

In addition to fire insurance coverage, multi-risk insurance can guarantee:

  • Damage to the property, common parts and other fractions caused by floods, storms and electrical hazards;
  • Damage caused to the movable property of the property;
  • Compensation for theft or robbery.

It may also include civil liability of the insured and the household or compensation for the death of the insured or spouse as a result of fire, lightning, explosion or theft, when occurring in the home.

Normally, it does not cover seismic phenomena. These will have to be contracted as supplementary coverage. If your home insurance doesn’t include coverage for your personal belongings, consider taking out insurance on your home contents.

The premium payable for home insurance

Insurers are free to set the price to pay for home insurance, however, this will always depend on the characteristics of the property, its contents and the value of the property and is associated with the insured capital.

The higher the insured capital, the higher the premium you will pay.

Insurance premium

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Everything you need to know about your insurance premium

The value of the insured capital

The value of the insured capital is always fixed by the policyholder at the beginning and during the contract. It is contained in the particular conditions of the policy and will be the maximum amount of compensation that the insurer will pay you if an accident occurs, even if the loss is greater.

Bear in mind that the insured capital must be adequate to the characteristics of the property, as the insurance company will only compensate you for the amount corresponding to the market cost of rebuilding the property. Thus, it is not worth indicating a capital value much higher than the reconstruction value of the property.

However, in order to know the capital to be insured, you must know the cost of rebuilding the property, taking into account its type of construction and other factors that may influence its cost.

As for the contents of the property, the value of the insured capital must be the cost of replacing the goods. In the insurance proposal, clearly identify the rarest or most valuable goods through a photograph, which includes works of art, jewelry and antiques.

But also keep in mind that the particular conditions include maximum values ​​for each of the coverages included in the insurance.

Calculate the market cost of rebuilding the property

You can calculate the market cost of rebuilding your property in two ways:

  1. Multiply the housing price per square meter of the property’s area by the gross area of ​​the property listed in the land register;
  2. Use the Real Estate Reconstruction Cost Simulator (SCRIM) developed by the Portuguese Insurance Association (APS).

As this is an approximate value, apply a 10% increase to the value obtained to determine the insured capital.

If the value of the insured capital exceeds the market cost of rebuilding the property, you will be harmed, as you will only receive the latter in the event of an accident and you were paying a premium higher than what you should have paid.

But if it is the other way around, you will also be harmed since, if an accident occurs, the compensation will be proportional to the ratio between the insured capital and the market cost of reconstruction at the time of the accident. That is, the so-called proportional rule applies.

let’s see an example:

He took out his insurance with an insured capital of 100,000 euros, but the cost of reconstruction is 200,000 euros. In this case, as the capital insured ratio and the market cost of reconstruction is 50%, the insurer is only responsible for 50% of the losses.

Thus, if an accident occurs with losses of 80,000 euros, the insurer will only pay compensation of 40,000 euros, the rest being borne by you.

7 tips for choosing home insurance tailored to your needs

Knowing that there are numerous offers on the market, it is up to you to choose the one that best suits your needs and your family budget.


Decide what coverage you want to take out in your home insurance

If the property does not have bank financing, decide if you will only hire fire insurance or multi-risk insurance.

In the latter, decide what additional coverage you want to include.

Do not forget that the more coverage you include, the more unforeseen situations will be covered and, therefore, the greater your security, but also the greater the premium to be paid.


Determine the market cost of rebuilding the property

Calculate this value to determine the value of the insured capital in terms of the property. Adjustment so as not to be harmed in terms of premium payment, nor in the compensation to be received in the event of an accident.

Remember that compensation is paid by the proportional rule. Thus, ideally, the ratio of insured capital and market cost of reconstruction at the time of the accident should be 1.


Request simulations from multiple insurers

As there is freedom in pricing, ask for simulation from several insurers. Indicate the coverages you want.


Review coverages and exclusions

Once the proposals have been received, verify that the proposed coverages are in fact the ones you have chosen and carefully read the exclusions. These are just as important as the coverages, as they are the situations that will not give rise to any compensation.


Compare offers and take your budget into account

Compare the proposals, but keep in mind that you can only compare those that have the same assumptions, and see if they fit your family budget.


Choose the proposal with the best price/coverage ratio

While it is important to have as extensive coverage as possible, the truth is that more coverage means having to pay more, so your family budget can be a limiting factor. So the important thing is to adjust the price / coverage ratio.


Save on your home insurance premium

As most insurers charge a fractional insurance fee, opt for an annual payment. Find out if paying by direct debit will also give you an additional discount, some insurance companies do.

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