Mortgage insurance is one of the most important steps you will be required to take when purchasing a home through mortgage financing. Home insurance is mandatory in terms of covering specific risks, ensuring that the financial institution is secured in case of damages or disasters, and at the same time, the borrower will be compensated for the value of the construction cost – fire-insurable value in the event of total destruction.
According to Circular 462 of the Bank of Greece, prior to the disbursement of the Housing Loan, the borrower is obligated to insure the property being purchased. The required insurance coverage may vary depending on the specific bank. Each bank may have its own set of insurance coverage requirements.
Mandatory coverage
- Fire coverage
- Earthquakes Coverage
The circular explicitly states that the borrower is not obligated to insure their residence with the bank that grants them the loan. They have the right to freely choose the insurance company they desire, as long as the insurance policy meets the coverage requirements specified in their loan agreement. In any case, the home insurance should meet the requirements of the lending institution that provides the loan.
- Fire, Forest Fire, Lightning, Firefighting Expenses
- Explosion
- Short circuit
- Terrorist activities
- Malicious activities
- Flood, Storm, Tempest, Snow, Hail, Frost
- Pipe Burst
- Aircraft Crash & Falling Objects
- Vehicle Collision
- Damages to the building from an attempted theft/burglary.
Coverage Limit & Exemption
Damage to the building from attempted theft/burglary The coverage limit applies per occurrence and per policy year, and it may decrease with each claim that may arise. It is renewed every year. Deductible is an amount from a claim that is not reimbursed.
Underinsurance
Underinsurance can pose a significant problem for your property/home. If the property is insured for a value lower than its actual worth, it is considered to be “underinsured.” Therefore, in the event of damage where the Principle of Average applies, it will not be possible to be fully compensated with the correct amount. With proportional indemnity, the insured will not be compensated to the extent that they would be if there were no issue of underinsurance.
Overinsurance
The term you are referring to is “overvaluation” or “overstating the value” of the property in the insurance contract. It occurs when the insured declares a higher value for the property than its actual worth. This can result in higher insurance premiums but may lead to complications in the event of a claim settlement if the actual value of the property is lower than the declared value. This is called overinsurance. Similarly, in this case, the Principle of Proportional Indemnity applies, and the insured will be compensated based on the actual value of the property and the value declared.
Replacement Value
It refers to the insured value of a property that corresponds to the amount of money needed to acquire a new, unused asset. Regardless of the age of the property, the insured will be compensated to rebuild the dwelling according to the damage it has suffered. For proper insurance coverage of the dwelling, the insured capital should be calculated based on market values rather than the age of the property.
Greece is a seismically active region that experiences regular earthquakes, which can cause serious damage to property owners. Especially during the summer months, there is an upward trend in wildfires due to high temperatures, strong winds, and even arson. Homes located near forest or rural areas are particularly vulnerable to the risk of wildfires.
Furthermore, in our country, the damages caused by floods and severe weather phenomena are increasing, which can result in immeasurable damage to homes. In the event of damage, the capital required for restoration may be high in relation to the owner’s financial capabilities.
The annual cost of home insurance is affordable for households. You can you provide comprehensive coverage for your primary or vacation residence for just 1.1€ per square meter for the entire year.
The economic cost of insurance can be supported by many households, despite the difficult economic situation in the country, and can provide the owner with comprehensive protection against natural disasters and natural phenomena.
Example of insurance: For a 100 sqm house with a building value of €100,000, the insurance cost amounts to €110 per year. Additionally, you can secure comprehensive coverage for the contents of your house for only €49.99 per year, for a content value of €25,000.
Yes, it can be insured on a case-by-case basis. Some of the insurance requirements are determined by its geographical location (if it is close to the sea or forest), the surrounding environment, and whether it is regularly monitored by someone.
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