Welcome. If you live in a building or housing complex, you have probably wondered whether it is necessary to take out community insurance. The answer is yes, and in this article we will explain why.
What is a Community insurance policy?
The residents’ association insurance is a protective shield against the number of claims that can occur in owner-occupied or neighbourhood buildings, such as a lift breakdown, a fire or water damage, among many others.
It is the right way to protect the whole building and the owners against any incident. And as we will go into detail later on, the advantages of taking out community insurance are many and range from savings on large payments to an improvement in coexistence.
Contact your property manager, they have the expertise to identify the essential coverages needed to protect homeowners’ associations. We understand that obtaining insurance for your community can be a daunting task.
Tailored coverage options are specifically designed to meet the unique needs of homeowners’ associations, condominiums and single-owner rental properties.
Is community insurance compulsory?
At a national level there is no law stating that it is compulsory to take out home insurance. According to the Horizontal Property Law (LPH), it is necessary to have a reserve fund; an annual sum to cover the conservation and repair works of the building or those derived from fires or floods.
As we have already mentioned, community insurance is not compulsory in Spain, and the need for this reserve fund does exist, although there are regional regulations (such as in the Community of Madrid or the Community of Valencia) that establish the obligation to have civil liability or fire insurance.
Advantages of taking out a residents’ association insurance policy.
- Goodbye to large payments: By taking out a homeowners’ association insurance policy, you avoid having to face unforeseen and high expenses to repair damage to the common property. This not only eases the financial burden on homeowners, but also gives them peace of mind knowing that any problems that arise will be covered by the insurance company.
- Improves coexistence: By avoiding arguments related to the payment of the contributions and repair costs of the common property, a more amicable and harmonious coexistence atmosphere is fostered in the community of neighbours. In addition, by having the backing of insurance, quicker and more effective decisions can be taken in the event of any eventuality that may arise.
- It contributes to savings: By having a community of neighbours insurance, unnecessary and duplicated expenses can be avoided. For example, if you have a private home insurance policy that includes coverage for the common property, you can exclude that coverage and reduce the cost of the policy. In addition, by avoiding having to pay out-of-pocket expenses, you can use the money for other purposes.
- No-claims renewal bonus: By not having to make use of the insurance, you can get a bonus on the renewal of the policy. This not only means additional savings for the owners, but also indicates that the residents’ association has kept its property in good condition and has avoided accidents or damage that may require the intervention of the insurance.
What does a community insurance policy cover?
Each company sets the basic coverages of its homeowners’ association insurance, including a greater or lesser number. However, there are some that the vast majority of homeowners’ insurance companies share, such as civil liability, material damage, water damage, community assistance and pest treatment and prevention. Depending on the residents’ association, insurers also offer a wide range of optional coverage to complete the policy. These tend to be the most common.
Obligatory coverage of a community insurance policy
Fire: cover for damage due to fire, explosions, implosions, lightning, abnormal electrical currents, floods and acts of vandalism.
Civil liability: covers indemnities and bonds for damages to third parties.
Optional coverage of a residents’ association insurance policy
- Aesthetic damage: covers the repair or replacement of the aesthetics of the building.
- Assistance in the building: special services such as surveillance, urgent repairs, telephone guidance, pest control, etc.
- Reconstruction of gardens: protects the plants and trees in the building.
- General pipe blockages: assumes the cost of unblocking general or community pipes.
- Cars in garage: protection of vehicles in the event of fire, lightning or explosion.
- Legal defence: covers legal costs and expenses related to claims processes.
- Breakages: covers damage to insured community property such as glass, sinks, sanitary ware, etc.
- Theft: replacement of keys and locks, replacement of stolen personal belongings or cash, renewal of documents, etc.
- Employee accidents: covers compensation and medical assistance in the event of death or disability of community staff.
- Inhabitability: in the event that the building suffers some kind of damage that prevents the residents from living in their homes, this cover covers the cost of temporary accommodation while the necessary repairs are being carried out.
Other extra coverage
- Civil liability of directors and administrators: if a member of the board of directors or the administrator of the building causes any damage to third parties in the exercise of their functions, this coverage takes charge of the payment of compensation.
- Theft of common property: in addition to theft cover for neighbours’ property, some policies also include protection for the community’s common property, such as air-conditioning equipment, security systems, electrical installations, etc
- Water damage: although some insurances include water damage in the fire cover, in other cases it is an independent cover that covers damage caused by burst pipes, water leaks, floods, etc.
- Atmospheric phenomena: this coverage covers damages that the building may suffer as a consequence of adverse meteorological phenomena, such as strong winds, hail, snow, etc.
- Community civil liability: although most insurance policies include civil liability cover, it is also common to find additional cover specifically for the residents’ association in the event of any type of accident or incident involving the association as an entity.
It is important to note that not all residents’ association insurance policies include the same coverage, so it is essential to read the policy conditions carefully to know exactly what is covered and what is not.
Exclusions in the community insurance: when the insurance company does not take responsibility
Each company has its own coverage and exclusions, although the most common thing is that they all coincide in not taking responsibility for the damage in certain circumstances:
- When the damage has been caused on purpose.
- In claims caused by certain natural phenomena, such as earthquakes or hurricanes.
- Defects in the construction of the building.
- In cases where maintenance has been poor or non-existent.
The importance of having the capital of the building properly adjusted.
When the policy is formalised, the real value of the building must be stated so that, in the event of a claim, the insurance will fully cover the cost of repairs.
The fact of insuring a property by putting a lower value than the real value is known as underinsurance.
It is also necessary to update the value over the years so that it always corresponds to reality.
How to choose the best Community insurance?
Carry out an exhaustive study, adapted to each community of owners, taking into account its specific characteristics (age of the building, type of construction, community services, surface area, annexes, etc.).
Avoid under-insurance by establishing correct values, from the insurance point of view, for the building and contents.
Review the coverages and exclusions in order to be very clear about what the community insurance covers and what can be rejected in the event of a claim.
To count on the help of specialists such as property administrators to facilitate the community’s decisions.
Frequently Asked Questions to have a insurance in the community
Answers to your questions
Community insurance provides protection for the building where you live against various potential risks (fire, theft, damage, among others) and also prevents conflicts between owners. For example, in the event of a fire, it facilitates the absence of additional financial outlays.
Community insurance is a multi-risk policy that includes numerous basic covers (fire, explosion and lightning strike, smoke damage, electrical damage, vehicle collision and aircraft crash, vandalism, rescue costs, demolition and debris removal, loss of rent, uninhabitability, among others). It also includes optional guarantees such as theft, water damage and pest control, etc.
We provide solutions and insurance for a wide variety of communities: residential buildings, premises and garages; office buildings, single-family housing developments, etc.
Our team will advise you at all times. Accurately calculating the insured value is essential in order to obtain adequate insurance. Usually, the assessment is based on official information from the Cadastre about the built-up area of the building. With this data, together with the type of construction and the location, we can establish a reconstruction value.
The content refers to the furniture and personal objects belonging to the community of owners, located in the common areas of the building and which do not have a privative character.
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