Property (Real Estate) Insurance in a Foreign Country

Property (home) insurance is what protects you when things go wrong. Flooding, theft, your building inexplicably sinking three feet into the ground - all of this can be covered by property insurance. It's very important. Many people don't buy it and deeply regret it.

Is home insurance mandatory?

In most countries, no (see our individual country guides for specific information on your country of interest).

However, that definitely doesn’t mean you shouldn’t have it!

Every time a town floods or thieves hit an area, you will see miserable homeowners being interviewed on the television, lamenting their lack of building and contents insurance. Do not be one of those people.

What are premiums?

Premiums are the amount of money you will have to pay monthly or yearly to keep up your insurance policy. They are calculated by a number of factors, such as the value of the property and its contents and home security.

What is excess?

Excess is the amount of money you will have to ‘pay’ towards an insurance claim. For instance, if you have an excess of €100 and you make a claim for €500, you will only receive €400 from your insurer. Generally, the higher the excess the lower the premiums.

Where should you buy property insurance?

When it comes to insurance, cheapest is seldom best.

Saving €50 on premiums may seem like a bargain – but if your protection is significantly reduced, or the company is difficult to deal with, it simply isn’t worth it.

The internet is your friend! Use it to compare prices and policies (price comparison websites abound in almost every country). Also make sure you do a Google search on the company you’re considering buying from to highlight any issues other customers may have had. You might be shocked at the results.

That said, speaking to people for personal recommendations is even better than the internet (some companies are finding sneaky ways to manipulate review sites). Talk to other expats (if you don’t know any personally, try some online forums).

‘Back home’ or abroad?

Should you buy insurance in your home country or in the country you’re moving to?

The first issue to consider here is that of language. Unless you speak the language in your new country fluently – and are able to understand complex legal documents in that language – you could find it very difficult to understand policies and claim forms.

If you think you might struggle with the language, buy your insurance ‘back home’ or pay a bit extra for a company which will provide documentation in your language.

Look into the law surrounding in both countries. You will probably find that buying insurance through a company based in your home country means that the policy is governed by the laws of that country – not the country where your property is. If you get into a dispute with your insurance company, will you be better off dealing with it ‘back home’ or in the country where the property is?

Can my bank or other mortgage lender insist I use their insurance?

In most cases, no. They can recommend that you do so, but they cannot force you to.

Often, insurance offered by banks is uncompetitively priced.

Important things to look out for

Always make sure:

You are dealing with a reliable company

Some see paying out as an optional extra or a reward for completing their administrative obstacle course. It is well worth paying a little extra to deal with a company that has a culture of prompt payment.

You read the policy document

I know that this is tedious, and that most people don’t bother. But you must.

You comply, strictly, with any conditions attached to the policy

If you don’t, they are likely to refuse payment.

Types of property insurance

Building insurance

Building insurance on its own covers only the structure of the property: your walls, roof and windows as well as fixtures such as plumbing and fitted kitchens.

Sum-insured policies

Sum-insured policies insure a property on the basis of how much it would cost to rebuild it from scratch – not on how much it is worth on the market. Your insurance supplier will work out your premiums on that basis.

In some cases, this sum can be less than the market value of the property. After all, you will still own the land and that might be 30% or more of the value of the building.

In other cases, the cost of rebuilding could be much higher than the property’s market value – especially if you live in an older ‘character’ building. How much would it cost to replace 16th century beams?

How do you find out the cost of rebuilding a property?

This can be difficult to assess – which is odd, considering most people have to do it before buying home insurance.

Fortunately, there are some websites that will help you estimate the cost of rebuilding a typical property of a typical type.

For example, specialising in UK property, the Building Cost Information Service, a part of the Royal Institution of Chartered Surveyors (RICS) and working at the request of the Association of British Insurers (ABI), provides a very detailed website allowing you to estimate the cost of rebuilding properties of different types, different sizes and located in different places.

Similar websites exist in many other countries around the world.

Bedroom-rated policies

A less common way of calculating premiums is by basing them on the number of bedrooms a property has. In theory, this means you don’t have to calculate the exact costs of rebuilding your property – but beware, as such policies will have a maximum upper limit. You will need to have a rough idea of how much it would cost to rebuild your home to make sure the limit is high enough.

Contents insurance

Contents insurance covers the possessions in your home.

How much should I insure for?

You should insure for the amount of money it would cost to replace all of your possessions.

High-value items

Do you have expensive possessions such as jewellery or expensive electronic equipment? Read through your policy carefully to make sure the upper limit on high-value items will cover them.

Personal possessions cover

Some home insurance policies will also cover possessions you take outside the home: mobile phone, wallet, handbag etc. This will be under a ‘personal possessions extension’. Some of these extensions will even cover your personal possessions if you take them overseas.

Subletting your home

Be aware that if you sublet your home, your contents may not be covered for theft unless there has been an obvious break-in (broken window, forced lock etc).

Combined insurance

Combined insurance policies cover both building and contents insurance. If you can get it, this is the best and simplest way to go.

What should home insurance cover?

Read your policy very carefully before buying insurance. This is no fun at all, I’m sad to say – but it is completely necessary. Your policy should definitely cover:

  • Full insurance for damage by wind, flood, fire, impact etc
  • Damage by explosion
  • Escape of water from tanks or appliances within the building
  • Escape of oil from any oil-fired heating system
  • Damage caused by riots or people acting maliciously
  • Damage caused by falling trees, lamp-posts etc
  • Full insurance against theft from your property
  • Alternative accommodation cover if your property becomes uninhabitable
  • Cover for architectural and other professional fees if repair work is necessary
  • Damage caused by infestation
  • Damage caused by subsidence

Things to look out for

  • Does it cover your swimming pool?Surprisingly, some policies do not.
  • Is there any limit to the value of the items covered in respect to theft?Most home insurance policies will only include the theft of items such as your hot water cylinder, your cabling etc. Some impose a financial limit on the value of such items.
  • Does the policy offer public liability insurance (see below)?If it does not, you will probably need to take out additional insurance.
  • Does the cover include employer’s liability insurance (see below)?If it does not, you will probably need to take out additional insurance.
  • Is there a high excess (the amount you need to pay yourself before you can make a claim)? In some cases this can be expressed as a percentage of the claim rather than a fixed amount and this could amount to a great deal of money.
  • Does the insurance cover long periods when the property is empty? Many policies provide no cover after the property has been empty for more than 30 days.
  • Does the insurer require special security arrangements – burglar alarms, cameras etc? Some will require these only if the content insured exceed a certain amount.

What if the property is in a block of apartments or other community?

This depends on the country – and the community – in which you own your property.

In some places, the administrators of the community will insure the buildings. However, in most places, they will only insure the common areas: the roof, shared walls, the pool etc. This leaves the rest of your home uninsured.

Some communities take it upon themselves to arrange full buildings insurance for all of the properties in the community. You need to check whether this is so in your case and, if it is, the scope of the insurance that has been arranged.

If a community arranges such insurance, the cost is shared by all the owners in the community and forms part of your community fees.

You may find that the insurance arranged by the administration or community is not suitable for your needs. In this case you will need to purchase your own insurance which, on top of any community fees you are already paying, can get very expensive.

Running a business from home

If you are running a business from home, make sure your policy covers any liability that may come from it. Many will not.

What happens if you leave your property unoccupied?

Most insurance policies stop providing cover if your property is left unoccupied for 30 days or more – it becomes a beacon to burglars and minor issues like a burst water pipe can turn into catastrophes if not administered to quickly.

Read our guides to Insuring a Holiday Home and Insuring an Investment Property for information about policies which will cover you if you’re away a lot.

What does it cost?

Prices will vary hugely from place to place; and depending on your property.

What can be done to reduce premiums?

In almost any country, there are basic things to be done that can reduce your premiums. Install secure locks, approved burglar alarms and, possibly, remote cameras. If possible, limit the value of the insured items in your property. A highly valuable diamond necklace could, for example, be stored in a bank’s safe deposit.

Other important insurance

Employer’s liability insurance

Most people are surprised when the subject of employer’s liability insurance comes up in relation to their home – but it is easy for claims to arise under the category of employer’s liability.

In some countries (see our individual country guides to check if this applies to you) the owner of the property is responsible for any injury or damage caused to someone working at the property whether or not they are technically the employee of the property owner. The claim is treated as an employment claim.

For example, if you are employing a cleaner at your home on a regular basis then that is – pretty clearly – an employment contract and so it is no surprise that if the cleaner is injured a claim could arise by way of employer’s liability.

What might be a little more surprising is that if you’re employing a contractor – for example, someone who comes to clean the pool once a month – and that person is injured then the claim that will arise will be an employer’s liability claim rather than a public liability claim.

You therefore need to have employer’s liability insurance to cover anybody who is going to be working on your premises.

Fortunately, such insurance is usually inexpensive if it is only going to cover casual employment such as this.

In some cases, it’s included automatically.

Public liability insurance

Public liability policies cover any claim made by a member of the public – someone who is not a member of your household, your employee or your tenant.

If your garden wall falls down on top of somebody’s car, that will give rise to a public liability claim.

If that postman walks up your path and trips over a hole in it, that will be a public liability claim.

If your swimming pool leaks and the water kills the plants in your neighbour’s garden, that will be a public liability claim.

Insurance against such claims is, again, pretty inexpensive.

Making a claim on your property insurance

Some companies are much better than others when it comes to dealing with (and paying out on) claims. Do a Google search on the company you are thinking of using – “XXX problems claims”. You will probably be surprised. This could be the most important step in the whole process of obtaining insurance.

Be prepared!

Study your policy carefully. Look at exactly what documents they need in order to make a claim and then make sure you have them to hand at home, in your car, digitally on your iPhone and in your handbag.

Keep receipts of items you are going to insure.

Keep your property well-maintained, as many policies will have clauses stating that your home must be in reasonable condition for it to be covered by insurance.

Act quickly

Lots of insurers will give you quite a long time to make a claim, but it’s best to do it at the first opportunity. Leaving a flooded house for a long period of time, for example, can make the damage worse – and, quite frankly, it’s best to get back to normal as soon as possible.

Keep the evidence

  • Take time-stamped photographs of any damage or forced entry to your home as soon as you can
  • Keep hold of any damaged items until the insurance company tells you it’s OK to throw them away
  • If you can do so, hold off on redecorating until your claim is processed

Independent assessment

If you are unhappy with your insurer’s assessment of the damage to your property, you can sometimes hire an independent loss adjuster for a ‘second opinion’.

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