Common Mistakes When Choosing Home Insurance Bring Unpleasant Surprises

Assumptions that don't match reality are the most common mistake made when insuring property. "Unfortunately, not everyone takes the time to think through what insurance coverage they actually need before taking out home insurance," says Gerli Mae-Vello, BTA's liability insurance risk assessor, and explains in more detail what risks people may underestimate when choosing home insurance.

Every year, there are cases in Estonia where someone's home and property suffer significant damage. However, when contacting an insurance company, the victim is unpleasantly surprised to discover that the chosen policy does not cover the damage that occurred to the extent they expected and needed. Where do such misunderstandings come from? "Unfortunately, little attention is paid to the insured amount for home property on the policy and other circumstances related to home property in the insurance terms," explains Mae-Vello.

"One of the biggest misconceptions is that people assume that if they have some home insurance, they are automatically protected against all incidents affecting the home. For example, there are areas where the risk of flooding is greater. It may turn out that the chosen risks policy does not cover damage caused by flooding, so you should also take into account the specific characteristics of your home's location and make sure the policy includes additional coverage for regional risks," explains BTA's liability insurance risk assessor and points out that a distinction must be made between comprehensive risk insurance and selected risks insurance.

Who pays for the neighbor's repairs?

The most common home insurance cases are related to water damage. "It is quite normal for a water pipe to leak or, for example, a washing machine hose to break. In such a case, the water damage can be quite significant, requiring replacement of both items in the room and the entire floor. In apartment buildings, however, in case of such an accident, water can flow into the apartment of the neighbor below, and then that damage must also be compensated to the neighbor," describes Mae-Vello one of the most common situations.

"If a person has chosen liability insurance along with home insurance, the insurance also covers damage caused to a third party," says Mae-Vello and adds that even in detached houses, situations can arise where the homeowner must compensate the neighbor for damage caused. "We have had many cases where a tree has fallen on a neighbor's building or vehicle due to a storm – in these cases too, liability insurance helps cover the damage that occurred to the neighbor."

Is the insurance amount sufficient?

Fire damage is fortunately not the most common insurance cases, but in their case the damages are the largest – generally a large part of the building and all property there is destroyed. "Before concluding an insurance contract, it is also worth reviewing the insured amount for your home property – in case of extensive damage, if all your home property is destroyed, is the insured amount stated in the policy sufficient to replace all the destroyed property," says BTA's liability insurance risk assessor.

"There have been situations where property has been insured at an amount nearly three times less than the actual value of the property. In such a case, in the event of total destruction, it may not even be enough for essential purchases and there is a risk of ending up under a significant financial burden," warns Mae-Vello and adds that the home itself is generally insured at its replacement value, but it is always worth paying attention to this on the policy. If a specific insured amount is stated for the building, then you must make sure that this amount is actually sufficient for the complete restoration of the building.

The importance of the home property insured amount can also become apparent in case of smaller damage. "The amount stated in the policy is the maximum amount that insurance will pay out for one incident. You should think about what property you have at home and if an accident happens to the most valuable item in your home, whether that amount is sufficient," explains Mae-Vello.

"For example, there was a situation where home property was insured for an amount of 2000 euros and a child threw a ball at a television while playing, which cost 3000 euros. In this case, the insurance paid 2000 euros and the family had to pay the remaining amount themselves for buying a new television. In this particular case, comprehensive risk insurance would have helped, because the basic risks: fire, storm, water damage and theft/vandalism, do not cover such damage at all," explains BTA's liability insurance risk assessor the importance of the home property insured amount.

What happens outside the home?

Mae-Vello explains that in addition to accidents that occur at home, in the case of an extension of the home property insurance location, portable property is also insured. "In this case, for example, clothing, mobile phones, laptops and scooters are insured even if the accident happens outside the home."

It is also possible to choose extended liability insurance, which means that insurance covers damage caused by you and your family members. "We have had cases where a child rode a bicycle into a guest's car, in this case liability insurance helped cover the damage caused to the car owner," gives Mae-Vello an example and adds that damage caused to other persons by a pet is also covered by the insurance in this case.

"It is important to become familiar with the possibilities of home insurance and find a suitable solution so that there are no unpleasant surprises later. A standard building owner's liability insurance only covers damage resulting from the building or property, so it is worth thinking about what your risk tolerance is," recommends the risk assessor.

Recommendations for choosing home insurance:

• When insuring, choose comprehensive risk insurance, which offers the broadest insurance coverage.
• Choose a sufficient insured amount for home property according to its value.
• For portable property, choose additional protection: home property insurance coverage outside your place of residence.
• If living on higher floors, choose a higher liability insurance amount so that in case of an accident, all damage claims from apartments below are covered.
• Read the insurance terms and ask for help from customer service.

You can familiarize yourself with BTA's various home and liability insurance options on the bta.ee website