Do you own or are you planning to buy a Property in Portugal? If the answer is yes then you will need an adequate insurance policy to cover the building and contents. Here are some brief guidelines on Home Insurance in Portugal prepared by Luso Insurance Agents – Portugal
Is Home Insurance Compulsory in Portugal ?
Insurance covering the risk of damage to property by fire is mandatory for buildings with adjoining properties such as apartments and condominiums. The Insurance policy must cover each property/apartment and the common parts of the building (roof, stairs, elevators, garage, etc.).. Insurance should be done by the owners of each fraction/apartment (condominium). If this is not done within a determined period and the amount decided at the meeting of owners, the administrator of the condominium should take out a policy on the owner’s behalf.
The obligation to insure the risk of fire is done by taking out a minimum insurance policy for “Fire and Elements of Nature”. Normally the risk of fire is covered in a standard buildings multi risk policy.
Compulsory Fire Insurance
This compulsory insurance covers damage directly caused by fire in apartments/properties and in the common parts of the building complex. Basic covers include property damage directly to insured property caused by:
* heat, smoke, or steam explosion resulting from fire;
* the means used to combat the fire;
* removal or destruction executed by order of the competent authority (fire,police, etc..)
* damage caused by falling lightning, explosion or other similar accident, evenif it is not accompanied by fire.
What is a multi-risk policy ?
As well as the compulsory insurance, homeowners in Portugal often opt take for the more comprehensive multi risk policy. The multi-risk insurance offers a set of optional covers including damage to property and/or contents, and may also include a civil liability cover.
The multi-risk home insurance in Portugal can cover:
* repair of damage to the building, apartment, villa for risks other than fire, such as floods, storms and electrical hazards;
* cover for damage caused due to moving house;
* cover for theft or robbery;
* the liability of the insured persons and their household against third parties
* cover for death of the insured or spouse, as a result of fire, lightning,
* explosion or theft which occurs in the home.
The multi risk insurance normally has a standard set of covers with optional additions for extended risks. Luso Insurance Agents – Portugal can provide information on additional covers available.
What about Premiums ?
The premium is calculated on the basis of the variable risks such as location and age of property, value of property and contents, security measures in place such as burglar alarm, smoke alarm, type of doors and locks, type of windows and shutters, claims history etc
Before taking out a home insurance policy in Portugal, the insurer will request the following information:
* the risks that are covered and those excluded;
* the optional coverage’s;
* other factors affecting the premium (for example, having a theft protection system or means of fire fighting);
By going through an established broker substantial discounts of up to 40% can be secured.
When does cover commence ?
The risk coverage begins on the day and time specified in the contract and subject to payment of premium.
How long is the contract?
The term of the contract can be determined by:
* a limited period agreed between the insurer and the policyholder or the insured (term insurance);
* one year, automatically renewed for further periods of one year.
* The contract ends at 24 pm on the last day of his term if not automatically renewed
What happens if the insurance is cancelled ?
* The insured is entitled to refund of part of the premium corresponding to the time that remained for the term of the contract, unless the contract state otherwise.
What should be the sum insured on the property?
The policyholder is responsible for calculating the capital insured from the beginning and throughout the contract term..
The capital insured must match:
* the cost of rebuilding the property taking into account the type of construction and other factors which may influence this cost;
* the matrix value in the case of buildings that are to be demolished or expropriated.
* To determine the sum insured shall be considered all elements of property (other than land), including the proportional value of the common parts.
What should be the capital insured for the contents?
In this case, the capital insured must correspond to the replacement cost of the proposed valuables, which must be clearly identified to insure the property and its value.
The more rare or valuable goods (Eg, antiques, works of art and jewellery) must be specifically identified, if possible through photographs and description of their features and be assigned a value.
In the case of a claim, it is the insured party that has the burden of proof, ie, has to prove that the damage occurred and that the goods belonged to them or were in their custody. It is therefore important to retain all documentation that proves the existence of the insured items, including itemized receipts to prove purchase.
How is the capital insured updated?
The update of the capital insured is the sole responsibility of the policyholder.
In the case of contents insurance, the policyholder should periodically update the value assigned to each item, bearing in mind that the cost of replacing may be higher than initially indicated.
In the case of compulsory fire insurance, it is mandatory to update the capital insured each year.
If a property owner does not know the current value of their property, the sum insured should be updated according to the Index of Buildings (IE) published by the Instituto de Seguros de Portugal.
Can the capital insured be automatically updated?
The policyholder can choose two types of automatic update of the capital insured:
Agreed Update – the capital insured is updated annually based on a percentage indicated by the policyholder (eg, to raise the value of the insured all 5% years);
Index Updated – the capital insured is updated annually according to changes in indexes IE (Buildings), IRH (contents) or IRHE (buildings and contents), published by the Instituto de Seguros de Portugal.
What are the obligations of the insured in case of claim?
In the case of a claim, the policyholder or the insured must:
* report the claim in writing to the insurer, in the shortest time possible (neverexceeding eight days from the day they occurred or who learned it),
* explaining how it occurred, what are the causes and consequences;
* take all measures in their power to prevent or limit further damages resulting from the accident, this may include the extent practicable, retain salvage and not modify the traces of the accident without authorization;
* to provide the insurer with all information it requests about the claim and its consequences;
* comply with safety rules that are imposed by law, regulation or legal terms of the contract. If the policyholder or the insured does not comply with these obligations, the coverage and the amount of compensation may be affected.
What are the obligations of the insurer in case of a claim?
In case of loss the insurer must quickly and diligently
* investigate the claim;
* assess the damage;
* pay compensation.
* The insurer must pay the compensation or authorize the repair reconstruction as soon as they completed investigations and damage assessment.
* If, after having all the necessary elements, the claim is not settled within 30 days, the insurer will have to pay interest on the amount of compensation.
What is the proportional rule and when does it apply ?
The proportional rule applies when the sum insured is less than the cost of reconstruction (in the case of buildings) or the cost of replacement (in the case of contents).
In this situation, the insurer will only pay a part of the loss proportional to the ratio between the cost of rebuilding or replacing on the date of the claim.
For example, if a building whose reconstruction cost is € 100,000 and € 80,000 is insured, the insurer shall be liable only for 80% of losses, with the remaining 20% payable by the insured.
If there was an accident that caused damage of € 50,000, the insurer would indemnify just € 40,000 (80% of € 50,000), the insured being liable for the remaining € 10,000.
If it turns out the opposite and the sum insured exceeds the value of reconstruction or replacement, compensation paid by the insurer will limit the amount of reconstruction or replacement.