What happens if my home does not have home insurance?

Is it mandatory to have home insurance? This is, possibly, a question that you have asked yourself at some time and its answer is not definitive. From the outset, it is not mandatory to have home insurance, but it is very convenient and even necessary. It is perfectly possible to own a house and not have insurance to take care of any accidents that may occur in it. Even if a mortgage has been contracted for a home, there is no obligation.But the practice advises hiring a Home Insurance adjusted to the home to have the peace of mind of knowing that any loss that occurs will not be a headache or a loss for the family economy. The so-called multi-risk or combined insurance, which protects damage to the continent and the content and with civil liability, are the most commonly contracted.

When is it mandatory to have home insurance?

Although it is not mandatory to have home insurance, the Mortgage Market Regulation Law and the subsequent regulations that develop certain aspects of said Law, do require that mortgaged assets “must be insured against damages for the appraised value“, and this insurance must be “appropriate to the nature of the same”. Likewise, it provides that the amount -the sum insured- for which this insurance must be carried out must coincide with the value of the first appraisal of the home.

In other words, while the mortgage loan lasts, it will be mandatory for our home to be insured against damage that occurs as a result of a fire. The beneficiary of this insurance will be the bank with which the home mortgage has been contracted since, after all, that asset belongs to them in part until it is cancelled.

Prohibition of linking the mortgage with the insurance

However, the European Mortgage Directive prohibits banks from linking the granting of a mortgage loan to contracting home insurance, which, in many cases, was mandatory to contract with companies belonging to the same group as the bank. Therefore, although it is mandatory to take out damage insurance in the case of mortgaged assets, it is not mandatory to do so with the bank that grants the mortgage, but rather you can freely choose any other insurance company.

Despite this, banking entities use certain subterfuges to avoid what is decreed by the European Community. For example, granting the contracting party, optionally, some benefit in the fixed spread of the loan linked to the contracting of insurance that must always be maintained, in such a way that if it is not maintained, the benefit is lost.

Over time, many people who have contracted insurance in this way, either because they realize how expensive some of these insurances are compared to the guarantees and coverage they offer, or because they receive cheaper offers from other companies with better benefits, they decide to cancel the bank’s insurance and then find themselves with the loss of that benefit in the spread and it makes them hesitate.

In this situation you have to do numbers, because in many cases the insurance offered by banks is expensive and with excessive demands and exclusions in the policy, so its usefulness is greatly reduced. Even if you lose the benefit in the loan spread, it is possible that, by taking out home insurance with another company, you can compensate for that loss and obtain, at the same time, better quality insurance.

Liability insurance

Apart from this, whether you have a mortgage or not, although it is not mandatory to have home insurance, it is highly recommended to be covered in the event of having a problem in your home, which may be minor, in whose case – even lacking insurance – we could face it; or of consideration, such as a fire, earthquake, etc., whose expenses most likely we could not afford. But it is even more necessary if we cause damage to a neighbor, since in this case, if we did not have home insurance with Civil Liability, we would have to bear the costs of the repair.

If the opposite were the case, that is, it is the neighbor who causes us damage, it would be the one who would have to make the appropriate repairs at his expense or at his insurance. If he refused to carry them out and did not have insurance, it would be our insurance that would be in charge of initiating the claim for damages, avoiding cumbersome paperwork and legal procedures, which further justifies the convenience of taking out home insurance with extensive coverage.