Potential pitfalls of apartment insurance

Potential pitfalls when insuring an apartment

Owning an apartment, especially within a co-ownership structure, can bring various risks and thus financially jeopardize various entities. Before you start thinking about insuring an apartment you own within a co-ownership structure (i.e., as a member of an SVJ/HOA), you should clarify at least the following questions:

• Which parts of the property are owned by the SVJ/HOA and which by an SVJ/HOA member? (apartment building, residential unit, residential unit furnishings, common area furnishings, land, etc.)
• What risks threaten the SVJ/HOA and what risks threaten its members?
• What liability damages are a risk and who is responsible for them?

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Why is this so important?

Primarily because standard insurance products typically allow you to insure against damages that cannot happen to you, or risks that threaten someone else, not you. It can easily happen that you will pay for insurance unnecessarily or, conversely, your insurance policy will be missing a specific stipulation regarding apartment co-ownership, which would prevent you from claiming insurance benefits in the event of damage.

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The most contentious question is the very value of the apartment unit. Insurance companies typically require the value (insured amount) of an apartment unit in co-ownership to be set at its usual price, which is defined as the market price, or what you paid for the apartment unit. However, insurance terms and conditions for compensating damaged property account for the repair of damaged parts at current construction work prices, which can be very different from market prices. This can go both ways (an apartment might be undervalued on the market, e.g., due to a problematic location, but repair work costs are the same as for an apartment in a premium location where the market price is significantly inflated and thus poorly suited for property insurance).

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Insurance companies often argue that in the event of total loss the insured can purchase a similar apartment in a similar location with the payout corresponding to the market price. But is it even possible for total loss of an apartment unit in co-ownership to occur? And even if such a case did arise, what would happen to the original, devalued apartment unit? These are questions that are difficult to get answers to from insurance companies and that raise doubts about how the insurance company would actually act in the event of a claim.

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It's not just about choosing the right insured amount and coverage, but also about a thorough risk analysis associated with apartment co-ownership. At Eurovalley, we will provide you with information on the most common risks and answers to questions regarding liability for damages and the obligations of individual parties. This way, you will gain clarity on the ownership, risks, and insurance of your apartment or apartment unit.

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Entrust yourself to professionals and get properly informed about apartment and apartment unit insurance issues. Eurovalley will help you find the best solution, which will precisely match your needs and ensure that your property is properly insured.

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