Multi-risk home insurance is the insurance by which the owner or holder of a home (or in other varieties, of commercial premises) tries to cover himself against the risks of it suffering damages of various kinds: derived from electrical short circuits, burst pipes, various breakdowns, domestic accidents, caused by storms, theft, etc. Also for civil liability arising from damages or injuries that may be caused to other persons or their property from the dwelling, such as falling objects from windows or balconies, flooding on lower floors, etc. It usually includes a breakdown repair service.
Often insurance companies in this line of business offer packages that include other coverages more or less directly related to the home or family life, such as liability insurance, travel assistance insurance, legal assistance insurance, etc.
Homeowner’s and community insurance
In condominiums, the multi-risk insurance of each dwelling usually coexists with another insurance of the community, which covers similar risks but with respect to the common elements of the building.
Household underinsurance
One of the most important aspects to take into account when insuring a home is the concept of underinsurance.
Underinsurance occurs when the value of the insured capital is lower than the replacement value of the insured object when new. In the case of home insurance it can occur both in the building (value of the building) and in the contents (furnishings, household appliances, etc.). When declaring a claim, the loss adjuster will check that the values appearing in the insured’s policy are real, otherwise, when compensating the claim, the proportional rule will be applied, which states: “In the event of underinsurance at the time of a claim, the compensation will be reduced in the same proportion as the capital is insufficient”.
This is best illustrated by an example:
Let’s consider a house with an insured content of $30,000. If a theft occurs and the value of the stolen property is $5,000, in theory the indemnity should be for that value. But if the real content of the house was $40,000 it would mean that we have an underinsurance of 25%, so the proportional rule would be applied to the indemnity and the insured would only be paid 75% or $3,750.
Home insurance obligation
Home insurance is not compulsory, unlike automobile insurance. This applies to most western countries.
