Be­ware when tak­ing out prop­erty in­sur­ance

Financial Mirror (Cyprus) - - PROPERTY - Μy Antonis Loizou

Like car in­sur­ance con­tracts with var­i­ous small print con­di­tions, a sim­i­lar sit­u­a­tion ex­ists with prop­erty in­sur­ance terms (very few peo­ple read and even less un­der­stand them).

Even if one in­sured their build­ing for “all pur­poses” in­clud­ing acts of God (rain, floods, etc.) be sure that the in­sur­ance firm has its back cov­ered in or­der to avoid or re­duce your claim. Re­cent events have come to our knowl­edge as fol­lows:

There is an ex­cess (i.e. any dam­age amount which will not be com­pen­sated) and it is up to the in­sured to pay the amount of the ex­cess. The higher the ex­cess, the lower the in­sur­ance pre­mium. Do not be lured by this and we sug­gest a min­i­mum amount of EUR 100-500 de­pend­ing on the value of your prop­erty. A re­cent ex­pe­ri­ence of ours for an apart­ment with an ex­cess of EUR 1,000, ended happy as the in­sured was for a lower fee, but re­cent dam­age was more or less not cov­ered.

Ex­cess –

Va­cant prop­er­ties –

Prop­er­ties which are va­cant for more than 30 days are not cov­ered. So, hol­i­day homes, not­with­stand­ing that you think that they are cov­ered, if you can­not prove that your prop­erty was oc­cu­pied for at least 30 days, you are not cov­ered. Opt for the clause to cover this as well be it for a slightly higher amount for your in­sur­ance fees.

If your prop­erty is dam­aged by fire caused by the sur­round­ing area – e.g. from a neigh­bour, bush­fire etc and your prop­erty is dam­aged, your prop­erty will most likely not be cov­ered – opt to have this in­cluded.

A client of ours who had his par­quet floor dam­aged as a re­sult of flood­ing, the in­sur­ance com­pany would not pay for its re­place­ment cost since the (par­quet) floor will be new, as op­posed to the ex­ist­ing one (4 years old). The stan­dard ap­proach is for the in­sur­ance to dis­count a per­cent­age from the present re­place­ment cost, say around 20%-50% of the new/re­place­ment, in or­der to cover the

Bush­fire –

New for Old –

dam­age. How­ever, our client’s dam­age of EUR 4,000/re­place­ment cost was cov­ered only for EUR 2,500, de­spite our client?s protest that he could not re­place the dam­age for this amount. Opt to have clearly the re­in­state­ment cost as new, or even de­pre­ci­ated pro­vided that amount you re­ceive can cover the dam­age.

Elec­tri­cal ap­pli­ances that cause dam­age to the prop­erty are not cov­ered if a prop­erty is un­oc­cu­pied and you should have all elec­tri­cal ap­pli­ances turned off (re­frig­er­a­tors, etc) while you are away – opt to have it cov­ered.



Tree Dam­age –

Il­le­gal build­ings –

Third party in­sur­ance –

A ma­jor is­sue for all own­ers is to have in­sur­ance cover in the event of a vis­i­tor suf­fer­ing harm from pro­trud­ing tiles, shiny floors, poor ac­cess and these not­with­stand­ing that the vis­i­tors may be tres­passers. In a re­cent case the hus­band of the owner, who was rush­ing to get out of the build­ing be­ing late for work slipped, sued the own­ers’ com­mit­tee of the com­plex for EUR 20,000 in med­i­cal bills. The first ques­tion is whether the hus­band is a vis­i­tor of the build­ing or an owner of a unit. The sec­ond is the in­sur­ance com­pany’s re­sponse since the ad­min­is­tra­tive com­mit­tee has re­ceived no re­sponse at all. Now the com­mit­tee will re­port the mat­ter to the Regis­trar of the In­sur­ance Board not only to cover it­self but to get the com­pany to re­spond so that other un­for­tu­nate in­sured do not ex­pe­ri­ence the same.

On an­other oc­ca­sion, and due to heavy stormwa­ter, the drains could not cope, and the unit was flooded. The in­sur­ance men­tioned that this is the cause of not clean­ing the drains (who does?) and that the in­sured should reg­u­larly in­spect the drains to make sure that they are free of leaves etc. (see hol­i­day homes in par­tic­u­lar).

An old tree fell down into the neigh­bour’s prop­erty, but no build­ing dam­age was caused, but the neigh­bour de­manded com­pen­sa­tion for the dam­age to his gar­den. It is not a mat­ter of a ma­jor amount but both be­ing stub­born the case is lead­ing to the courts and the tree owner’s in­sur­ance does not recog­nise any re­spon­si­bil­ity.

Build­ings with­out a per­mit (and by pro­jec­tion build­ings with­out a cer­tifi­cate of fi­nal ap­proval) the in­sur­ance may claim that it will not cover, not­with­stand­ing that they are happy to take on the fee and with­out ask­ing be­fore­hand.

if a

Sub­si­dence –

Overin­sured -

build­ing has some

Ad­min­is­tra­tive Com­mit­tees [email protected]


or not

Dam­age caused to a com­pre­hen­sive de­vel­op­ment project in­clud­ing apart­ment build­ings should be man­aged by an ad­min­is­tra­tive com­mit­tee (a ma­jor is­sue is what is an ad­min­is­tra­tive com­mit­tee if it needs to be so regis­tered with the Land Registry Of­fice – a mess). So, in a re­cent case, the ad­min­is­tra­tive com­mit­tee sued its in­sur­ance com­pany for the amount of ex­cess for the res­i­dents. A ma­jor is­sue since some of the res­i­dents did not pay (and the in­sur­ance claims that the build­ing was not in­sured as such).

By pro­jec­tion, if a block suf­fers from fire/earth­quake and says out of ten apart­ments some do not pay their in­sur­ance how is the build­ing go­ing to be re­paired?

As we have re­ported be­fore, the own­ers claim for dam­age caused by the soil sub­si­dence. Now the in­sur­ance claims it is not cov­ered, and com­pen­sa­tion should be sought from the de­vel­oper/ ar­chi­tects/ con­trac­tors. A mess since no one be­lieves that this will hap­pen to his own prop­erty.

Eight years ago a small mil­i­tary plane fell onto a house in the Li­mas­sol sub­urbs. The in­sur­ance sub­mit­ted the re­in­state­ment cost to the ex­tent that it thought proper, but then who on earth will buy a house which has had such dam­age?

If a prop­erty is un­der­in­sured (e.g. a house has a re­place­ment cost of EUR 300,000 and you in­sured the prop­erty for 100,000), the in­sur­ance will pay 1/3 of the whole cost of re­place­ment for any item. If in­sured for more the in­sur­ance has no prob­lem to take the fee on and bother with it later com­ing up with all sorts of ex­cuses.

The list is end­less, and we wish we had some sort of a com­pre­hen­sive list of things to watch out for. It re­minds me of when one of our cars did not have an MOT test (ex­pired for 3 days). As a re­sult, our in­sur­ance cover did not ex­ist, and we were fined for driv­ing with­out in­sur­ance.

Antonis Loizou F.R.I.C.S. is the Di­rec­tor of Antonis Loizou & As­so­ciates Ltd., Real Es­tate & Projects De­vel­op­ment Man­agers

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