How to Correctly Insure Your Property?
Today, we have another important topic to introduce you: How to correctly insure your property? Yes, our main expertise lies in real estate brokerage and property management. But at the same time, we aim to provide practical tips for the home owners.
This is also meant as a reaction to a recurring set of queries regarding the property insurance from the home owners’ or buyers’ points of view.
What price types currently exist on the insurance market?
There are 2 different price options to choose from when insuring the property:
| Current price: This scenario happens when an insurance company is paying the current value for which you would be able to rebuild or reconstruct the property into the original state (if the damage is not too extensive). The important parameter here is to keep the SAME property standard so there is no enrichment from the insured event.
| Value over time price: Luckily, this option is decreasing in popularity among insurees since the insurance company takes into account the property condition at the time of the insured event.
If you are wondering which option is cheaper for you (the insuree) then it’s no surprise that the latter one would be the choice. But it is important to mention here the significantly lower financial compensation from the insurer. Therefore, the current price option is the right choice, even though it is a bit more expensive.
How to set the insurance value?
Here it gets a little more complicated. The insured value should always correspond to the CURRENT value of your property. Due to the continuous growth of real estate prices in the Czech Republic in recent years, every property owner should regularly update their insurance. We at Propexa recommend doing so every two years. According to last year's survey by ČSOB insuracne, every sixth property in the Czech Republic is underinsured.
“Underinsurance is a situation where the property is insured for a lower amount than its actual current value. In this case, people may find themselves in a situation where they have to cover part of the damage from their financial savings.”
You can use an expert opinion to determine the insured value. The expert will provide the most qualified and at the same time the best estimate of the current value of your property. However, this step is charged with an amount between 3 - 4 thousand CZK. If you would appreciate a cheaper option, a trained consultant will help you to determine it.
Do you need help with property insurance?
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How do I know that the value of my property has increased?
As already mentioned, the increase in the value of real estate is due to a general increase in real estate prices in the Czech Republic. But that's not all. The price is also positively influenced by:
partial or complete reconstruction of the property
new roof, facade
ancillary buildings within family houses (swimming pool, terrace, garage, etc.)
for apartment buildings, it is the reconstruction of the interior and exterior of the building, a new elevator, etc.
Real estate insurance vs. household insurance
These two frequently confused terms are the cause of many unpleasant and surprising situations for many people. So we would like to explain these two important concepts in detail:
| Household insurance: This type of insurance covers damages to belongings that are not firmly attached to the property. So for instance, if you would "take the property in your hands and shake it", everything that falls, or changes its position is covered by the household insurance. This covers mainly furniture, personal belongings, electronics, valuables, decorations, etc.
| Real estate insurance: This category of insurance covers all things that are an integral and fixed part of an apartment or family house. It covers everything from walls and floors to power lines, heating, air conditioning, ceilings, door frames, doors, windows, etc. However, the list of specific insurance items differs among insurance companies and therefore we recommend paying increased attention to the list of such objects. Each insurance company or intermediary is obliged to share this list with you before signing the contract.
Liability insurance
Today, insurance companies offer the option of additional so-called liability insurance. But what responsibility are we talking about?
| Property ownership liability: The property owner's liability covers the damage you cause to someone else by using your own property. This damage may be in the nature of financial damage, personal injury or legal costs in litigation. You can't think of any examples? Spread of a fire from your apartment to neighbors, fall of a flowerpot and injury to a neighbor, fall of a tree from your land to a neighbor's property (garden house), etc.
| Civil liability: This type of liability is not related to real estate, but to your civic (ordinary) life. By your actions, you can cause damage that is either financial, health or property related. According to the Civic Association, you are fully responsible for it even if it is caused by your children or a four-legged friend. Also important is the fact that the damage may not be intentional. For a better idea, it may be an unintentional collision of a pedestrian (covering medical expenses), breaking your friend's mobile phone or laptop, your child could break a window to a neighbor during a "penalty shootout", etc. You can also negotiate this product as part of the real estate insurance.
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What insurance events should not be missing in your contract?
Among all insurance companies on the Czech market, we count around 30-40 insurance risks. Among the most important are:
| Household insurance
Electronic devices and data carriers
Household building components
Things of special value and valuables
Things in non-residential space (cellar, bike shed)
Things for gainful employment (gains more importance in the home office setup)
Sports equipment
| Property (as a construction) insurance
Water damage
Theft and vandalism
Floods (individually according to the location of your house)
Natural events
Damage to the roof and facade
Undervoltage, overvoltage and indirect lightning strike
Atmospheric precipitation
Electricity, water and waste distribution accidents
Ancillary buildings (within family houses and gardens)
We recommend you to ensure that this set of risks are actually included in the insurance. And if they aren’t? Please reconsider the submission of a new proposal.
Just as in the case of real estate sales, we recommend you to follow systematic and consecutive steps to ensure that your insurance is set correctly and at the same time protects you from underinsurance and the resulting financial costs.
Contact your local specialist
Evaluate the real risks together
Choose from household insurance vs. real estate insurance
Let them explain the exclusions and conditions for the payment of insurance amounts
Set the correct insurance sum
Set the correct complicity fee (we recommend 1%, with at least 5 thousand CZK)
Regularly update the sum insured of the property
Property insurance protects your property from unexpected situations that can be associated with significant financial losses / costs. Therefore, pay special attention to this product.