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.
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