For many homeowners, the question of whether and when building insurance is necessary for a home comes up again and again. What happens if a storm covers the roof of the house. Does buildings insurance then pay for the necessary repairs? Initially, buildings insurance is not mandatory. Here, homeowners voluntarily decide which risks to cover. In certain cases, such as real estate financing, homeowners insurance may be required. In the following article, we will take a closer look at the necessity of homeowners insurance.
Homeowners insurance = mandatory insurance?
To put it in a nutshell, homeowners insurance is in no way a compulsory insurance. Every homeowner is free to decide for which dangers and risks he wants to insure himself. Even if the owner decides against an appropriate building insurance, this should be tolerated. Ultimately, he bears the financial consequences all alone.
Buildings insurance is particularly important
The residential building insurance is not a duty and nevertheless this belongs again to the insurances, which one should lock as a house owner absolutely. This insurance covers the costs of repairing and eliminating damage caused directly to the building by hail, storm, tap water and fire. The financial commitment for a repair can be very expensive, which is especially true if one’s own house has burned down and ultimately has to be rebuilt.
What benefits does the insurance provide for a homeowner?
Likewise, certain structural components that are permanently attached to a house as well as outbuildings can also be insured. Therefore, for homeowners, the so-called “connected home insurance” makes a lot of sense. The following insurances are included:
- Fire insurance
- Storm and hail insurance
- Tap water insurance
In addition, with many providers it is also possible to take out additional causes of damage, such as overvoltage damage resulting from a lightning strike, as well as vandalism and graffiti. With an additional surcharge, even more additional services can be concluded. For example, you can take out natural hazards insurance, which covers flooding, damage caused by heavy rain, backwater, snow pressure, floods, landslides, avalanches, subsidence, volcanic eruptions or earthquakes.
Building insurance for real estate financing
Although homeowners are not required to have building insurance, there are exceptions where it is a requirement to have building insurance. This concerns mainly those who want to buy or build a house and need financing for this investment. Therefore, often the condition for obtaining a mortgage or a real estate loan is the provision of certain collateral.
As a rule, this is the property itself. This is because it is encumbered with a corresponding land charge. If the situation arises that a homeowner can no longer service the loan or credit, the bank can foreclose on the house in order to repay the costs. In order to ensure repayment of a loan even in the event of major damage to the house, this involves making homeowners insurance mandatory as part of the financing. Thus, in the event of damage, the bank can compensate the current loan through a corresponding insurance payment. As a rule, the bank is also entered as an assignment creditor in the corresponding policy. This means that the bank receives the money first, followed by the homeowner.
Despite compulsory insurance, buildings insurance should remain affordable
Affordability is a key issue that needs to be urgently clarified before making buildings insurance compulsory, because it must remain affordable in any case. Likewise, constitutional concerns must also be further addressed. In addition, the leading ministries insist that appropriate insurance can only be a corresponding part of an overall solution. Different protective measures should successfully prevent damage in advance. However, this not only concerns many individual preventive measures, such as backwater flaps or watertight basement windows, but also changes related to construction, such as polders and dikes, for which the state and local governments are responsible.