Insurance for apartments

 

Most individuals in Cyprus take out insurance to protect their property from numerous

calamities, such as fire, earthquake, broken pipes, floods, acts of God, etc. Because it is

impossible to predict the damage's source, a structure should be insured for all scenarios,

even if this results in a somewhat higher insurance premium. However, special care must be

taken when signing the insurance policy to avoid the so-called "exclusion clauses."

One such exclusion provision states that there is no coverage if a structure is destroyed due

to a bushfire (unless you stipulate). Other terms of particular significance for structures

include that if a building is not inhabited for 30 days, you will discover that you are not

insured (practically all holiday homes). So, knowing how complex and perplexing an

insurance policy may be, pay close attention to the exclusion provisions and insist on all

risks and eventualities coverage.

Some insurance companies mandate that they pay either the replacement cost or the value of the structure

The distinction is that if you have a building with no intrinsic worth, such as

because it is extremely old or because the land value is so high that the structures have no

additional value, the insurance company will not pay. If you own an old house on a Makarios

Avenue plot with a development value of $2.0 million and your building is damaged, the

insurance company can claim that because the value of the property is found in the land,

there is no damage payable, even though the insurance company was happy for you to

insure the building at the value you specified. Even in this case, with the $2.0 million plot,

you will be uninsured if all you desire is the money to reconstruct it. In this instance, you

should get insurance for the replacement cost. The insurance company will only pay if you

really start rebuilding the home. So only expect to retain your $2.0 million plot and obtain the

replacement cost of your home if you have to rebuild it. If, on the other hand, you insure the

house's replacement cost rather than its worth, the insurance company is obligated to pay

for the rebuild.

In many situations, the replacement cost will be more than the market worth of the structure

If we take an old flat of poor quality and limited demand with a market/sales worth of (say)

90.000, the replacement cost may be more than 105.000. So be cautious, and we

recommend that you insure your building at replacement costs, including demolition,

clearing, new design and permission charges, construction building costs, V.A.T., and so on.

As an example of current costs for a typical flat, the replacement cost is roughly $1100/sq.m.

Replacement cost entails rebuilding the property as if it were new but using the building's

materials and quality. So you can't claim the money to replace your building's flooring with

granite since your residence has mosaic tiles, an antiquated kitchen, and wooden windows,

among other things. The insurance provider must reimburse the cost of reconstructing using

the same or similar materials and quality. Care must be taken, though, since if you estimate

a replacement cost lower than the real one, the insurance company will pay the equivalent

decreased amount. (If your home has a replacement cost of $100,000 and your insurance

policy is for $75,000, the insurance company will only pay 70% of the replacement cost - If

you overestimate the value of your property, the insurance company will only pay the real

amount as a maximum.)

Another issue to consider is that, in addition to the replacement cost of your building, you

must also include the common spaces, such as basements, parking, swimming pools, the

cost of clearing, and so on. As a result, it is advised that, in the event of a building/project

with several units, a full evaluation be performed at regular intervals (say, every 2-3 years),

covering both the apartments and the common spaces. This is strongly advised because

construction expenses rise by 7%-10% every year.

Another challenging challenge is what occurs when, in a large project, such as a block of

flats with ten apartments, eight units are completely insured, but the other two are

underinsured or have no insurance at all! In such a circumstance, the project cannot be

rebuilt (since the replacement cost is paid when the property is replaced, what is the legal

status in this instance?). As a result, for such projects that include more than one holding,

comprehensive insurance should be conducted and paid for as part of the shared

expenditures to mitigate the risk stated above.

Of course, insurance claims do not occur often, and as a result, many individuals need to

have appropriate insurance coverage, or the aspects above are not given due attention as a

priority. It's weird since we're all willing to spend 300.000 for an apartment, but we need help

paying enough money to safeguard this investment.

What's more, if you get a loan from a bank and the bank insures the building, and the

bank/insurance suddenly needs to pay up the insurance amount, if you're underinsured, you

must pay the insurance/bank the difference!! As a result, it is a strange scenario for

everyone involved since banks have no obligation because they use their own insurance

business.

In terms of individual buildings, each owner must sufficiently insure their property, seek

explanations from the insurance provider, and seek some "completely comprehensive

insurance - all risks." For these reasons, but more importantly in the case of joint ownership,

you must insist on comprehensive insurance for the entire project, including roads and other

infrastructure, which should be updated every 2-3 years with a new valuation by a qualified

surveyor, and do not base your estimate on the historical cost of the initial purchase. - Those

who believe they will purchase more insurance will not get a "double" payment since

insurance payments are made once, up to the whole "correct" amount.