I often have the feeling that many readers of the blog think it is mandatory to buy a safe home for housing. Especially when they have requested a mortgage loan and the bank requires them to take out insurance. At least that is what I perceive in the content of quite a few of your questions.
The same thing happens with this as with the secret ingredient in Coca-Cola, many people think that it is cocaine.
In both cases … nothing is further from the truth.
Home insurance is one that has the highest ratio of employment. Three out of every four households have taken out home insurance. But this does not mean that it is mandatory to take out home insurance for your house. Or if it is?
In this article, I am going to discover what is true in all this.
When is it mandatory to take out home insurance for your house?
Today, it is not mandatory to take out home insurance. The law does not require it even when we take out a mortgage loan to pay for the home.
At the end of 2013, the European Parliament approved the European Mortgage Directive that prohibits banks from linking a mortgage to the purchase of a home, life, or any other insurance.
The bank, sometimes, does not limit itself to offering you the insurance, it imposes its contracting arguing that it is mandatory and more, for the granting of the loan.
The truth is that there is an assurance obligation that can often lead to doubt.
What the law says is that it is mandatory to contract home insurance if the bank plans to sell all or part of that mortgage to third parties ( securitize the mortgage) through certificates, bonds, or mortgage participations, it must cover what guarantees the loan with insurance damage. In other words, the bank as the holder of the mortgage is the one who must have the insurance.
The one obligated to take out the insurance is the bank itself, although, in practice, it includes this obligation in the loan conditions. Therefore, since you are not obliged to take out the insurance, you can refuse to do so, regardless of whether you can voluntarily subscribe to it with the insurance company that offers you the best conditions.
You should know that if the financial institution denies you credit for not taking out insurance, you can report this practice, in addition to refusing to take out any other type of insurance.
If I rent a home, do I have to take out home insurance?
If you have already paid for the home, you are also not required to take out damage insurance. But it is recommended that you do it. In addition to covering the risks inherent to the property (fire, explosion, meteorological phenomena, etc.) you will be insuring the damages that you may cause to a third party.
Is it mandatory to purchase home insurance as a renter?
The answer is: no. But the sensible thing to do, even if the law does not oblige you to do so, is to do it.
If you enter a tenant’s house, you are obliged to respond to the damages you cause. If they are to the property you will have to do it before the owner or his insurer. But you will also have to answer, in front of a third party, for those who use their property.
Leaving a badly extinguished cigarette, the fireplace on or the tap running can be very expensive oversights. Damages to the property could be substantial, but those caused to third parties even more so. And if your landlord has insurance to take care of these damages, prepare yourself because the insurer will not miss the opportunity to claim you.
If you have ever been told that it is mandatory to take out home insurance, you have been misled.
It is not to write a mortgage. Nor if you are a tenant of a home, much less if you are the owner.
But one thing is the obligation and another to use common sense.
If you are a tenant who unless you have insurance that covers civil liability, will protect you from the consequences of carelessness. If you have a property you own in the house, insuring the theft will not hurt you. Nor is it too much for you to buy legal protection or assistance at home. Having legal advice or repair service can be helpful, as well as cheap.
Finally, if you are on the way to being a homeowner or already are, and since the whole house is yours, you can also buy all the coverage that is of interest to you.
It may also interest you: What guarantees do I need in my home insurance?
I hope you enjoyed this short article as much as I did writing it.
Now it’s your turn, have you ever felt compelled to take out home insurance?
I will be delighted if you tell us in the comments.