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Spanish Home Insurance Guide

After watching the influx of television programmes giving advice on buying Spanish property, you may have finally taken the plunge and bought your dream Spanish holiday home. With the stress of choosing a lawyer, getting a mortgage and all the other hassles, perhaps you haven't given much consideration to Spanish house insurance. Whether you are going to use your Spanish villa or apartment as a family get-away or holiday let it for investment income, it is essential that you arrange suitable house insurance in Spain - after all, it's likely to be one of your biggest assets.

Most insurers see bigger risks associated with holiday homes because they are often left unoccupied for long periods, prone to burglary and weather damage. Therefore, finding suitable insurance can be difficult.

By following these tips you will have a good idea of what cover you need and the restrictions to identify that can render a Spanish property insurance policy virtually worthless.

Is it best to arrange insurance with a Spanish or UK based Insurer?

When exchanging contracts your Spanish solicitor or moneylender will need proof that you have suitable buildings insurance, or they may recommend a Spanish Insurer. Before you choose a foreign policy it is important that you read the small print so you understand the scope and restrictions of cover. Unless you are fluent in Spanish this can be a problem.

You may also find that Spanish home insurance policies offered by foreign insurers are cheaper, however cover tends to be much more limited than what we are use to in the UK. Therefore, a saving of £50 in premium could prove costly in the event of a claim, if something you took for granted as being covered isn't. You may be better off choosing a comprehensive policy from a UK based insurer that's written in plain English and specifically designed for Spanish holiday homes.

To further complicate matters, some Spanish banks are renowned for being difficult when a holiday home owner chooses a policy other than the one they recommend, regardless of it providing better cover. This begs the question - how will they deal with a claim? Banks can't insist on you taking their own insurance.

What cover do I need for my Spanish holiday home?

Buildings insurance in Spain

Building insurance generally covers the actual structure of your Spanish home, outbuildings, garages, swimming pools, walls, gates and fences. These tend to be covered against the cost of repairs or rebuilding, debris removal and professional fees following loss or damage caused by earthquake, fire, storm, flood and burst pipes. Building insurance should also cover permanent fixtures and fittings within the buildings, such as fitted kitchens and bathrooms. Some Spanish policies may exclude swimming pools and outbuildings from the buildings cover so check.

How much should I insure the buildings for?

Most people assume they should insure for the current market value of their Spanish property. This is wrong. The sum insured needs to cover the cost of rebuilding the property. The rebuild value is the full cost of reconstruction of the building(s) in their present form. This amount must include all outbuildings, barns, domestic oil & gas pipes, domestic oil fuel tanks, swimming pools, tennis courts, drives, patios, terraces, walls, gates and fences.

How do I calculate the rebuild value?

To calculate the accurate rebuild value of your Spanish holiday home, a qualified surveyor should be commissioned to assess the amount that a property should be insured for. Your lawyer, vendor or builder may also be able to advise you on the rebuild cost. Alternatively, if you had a survey report done on the property there may be a rebuild figure listed for insurance purposes.

It is important to get this figure right because if you underinsure you may not get the full amount you were expecting in the event of an insurance claim. Most insurers will automatically index link, which means the sum insured will be adjusted yearly to take into account changes in rebuilding costs.

What does community buildings insurance cover?

If your Spanish home is part of a complex or apartment block, your condominium fees may include community buildings insurance. Each policy differs, but generally this cover is limited to communal areas such as walkways, pipes or windows. You may find that (unlike UK insurance) this does not cover fixtures and fittings, such as bathrooms and kitchens, within apartments.

We often get calls from customers where we insure their contents and their buildings are covered by the community policy. They assume their buildings are covered until the event of a claim and problems arise. On one such occasion a Spanish holiday apartment was flooded, causing damage to the kitchen units because someone from the apartment above left a tap on. When they tried to claim on the community insurance the insurer would not pay out because the neighbour caused the flood and the community policy didn't cover fixtures and fittings. This is just one example of many where apartment insurance in Spain can be inadequate.

To avoid such problems in the long run, you should check what your community policy actually covers before you decide you do not need buildings insurance. You may need to get extra buildings cover.

Contents insurance

What items are considered contents? As a rule, contents insurance covers everything you would take with you if you moved home. This typically includes general contents within the home such as furniture, furnishings and electrical equipment. Most policies cover your contents in the event of fire, storm, flood and theft. To calculate the contents sum insured you should work out how much it would cost to replace your contents on a new for old basis at today's prices. It is important that you get this figure right and don't undervalue your contents, as in the event of an insurance claim you may not get the full amount you were expecting.

Spanish property insurance policies do not usually cover personal valuables as most properties are often left unoccupied for long periods or commercially let. If you take valuables to your holiday home you should insure them under the all-risks section of your main household policy or travel insurance.

Accidental damage to contents

If you are going to use your Spanish home for holiday letting, choose a policy that covers accidental damage to your contents, including damage caused by holidaymakers (e.g. if a holidaymaker damages a chair or TV). Guests often aren't as careful as you and accidents do happen.

What about employers & public liability insurance?

It is very important that you choose a policy that includes public liability insurance, especially if you are planning to commercially let your holiday home. These are litigious times and liability insurance will cover you for legal costs and expenses following death, injury or damage to a third party on or near your property. It is especially important for apartments where there is a risk of overflowing baths, leaks, and accidents to neighbouring properties.

Most Spanish community buildings (apartments) policies provide limited protection for public liability insurance, with some offering only up to £100,000 maximum indemnity. This could leave you very dangerously exposed as any meaningful injury claim would potentially exceed this limit. A minimum indemnity of £3m is recommended.

Even if you aren't planning to holiday let your property in Spain, it is still advisable to get liability cover. What would happen if you let a friend rent your holiday home and they slip in the shower, break a leg and have time off work. Maybe they would have to take legal action against you?

If you have a swimming pool ensure that in the event of an accident you and you holidaymakers are covered under your public liability insurance.

Don't forget to include employers liability insurance in your policy. This protects you against legal action from injured domestic employees, such as change over staff or the gardener.

Am I covered when my Spanish house is unoccupied?

You will find that most Spanish house insurance policies exclude cover when a property is unoccupied. Some insurers insist the water system is drained during periods of unoccupancy, or the property is heated constantly to a certain minimum temperature. Would you be insured if your electric heating failed due to a power cut (or you forgot to drain the water) and a burst pipe occurred? Choose a policy that doesn't include complex unoccupancy requirements, such as Schofields.

What security precautions do you have to take?

Check the insurers security requirements. Do you have to inspect the property regularly, install specific locks, an alarm, shutters or grills on windows? You could even find insurance invalidated by having the wrong type of locks on the doors or by not using the shutters when you go out.

Is comprehensive theft cover provided?

Holidays homes are attractive to burglars as it is relatively easy to identify when they are occupied or empty. Check that theft by non-forced entry is covered, for example a burglar entering through an unlocked window or door, even someone using a key. Many policies require proof of forced entry.

When holiday letting to virtual strangers it's also important to ensure theft by guests is covered.

What is the claims process - what about language problems?

There are many questions to bear in mind when you need to make a claim. Will your insurer be capable of sorting out a claim quickly and efficiently when you are hundreds of miles from your home in Spain? Does your insurer have the authority to manage claims and make decisions in-house or is the claims handling process out-sourced to a call centre? Will they appoint loss adjusters? How quickly will you receive settlement?

If your command of the native tongue is low, how easily will you be able to fill out claims forms in Spanish? Make sure you are aware of the policy excesses in the event of a claim. These can be substantial, especially for earthquake claims where some insurers charge a percentage of the sum insured.

Also pay attention to the small print in relation to storm and flood cover. Some insurers require minimum wind speeds or rainfall levels to be recorded at a nearby weather station in order for a claim to be valid.

Understanding exactly what a policy covers in the event of a claim can be a challenge, even in English. If you choose a policy written in Spanish, have the document properly translated so you understand what you are getting.

What about cover when holiday letting for loss of rent and alternative accommodation?

If you plan to commercially let your holiday home in Spain it is important that you choose a policy that allows letting. Some Spanish home insurance policies only cover use by friends and family, as letting can increase the risk of a claim.

One of the biggest worries when holiday letting is if your property becoming uninhabitable as a result of the unexpected, like a burst pipe or a fire. During the peak holiday season such a disaster could mean thousands of pounds in lost income and a huge inconvenience. Choose a policy that will allow you to claim for the loss of rental income and pay for temporary accommodation for you or your holiday guests.

Also, check your policy covers travel costs incurred in getting you to your holiday home following a large claim - you'll probably want to be there to organise repairs and replacements.

Complaining and Legislation

Insurance regulations and conditions are not universal and the terms for insurance you may reasonably expect in the UK are not the same in Spain. Under the terms of a UK sourced policy, if you are a UK resident, UK law applies so you don't have to worry about complications regarding obscure Spanish laws and regulations.

Spanish insurers also have their own labyrinthine of complaints procedures and unlike the UK, customers of these foreign providers generally do not have recourse to the equivalent of an ombudsman or the FSA.

How easy is it to cancel your insurance?

Cancelling Spanish house insurance can be very complex compared to the process in the UK. You can't cancel at the last minute with a phone call or let it lapse. You must give written notice of cancellation as specified in the policy. Often, by the time you get the renewal notice it's too late to cancel and the policy automatically renews.

Do premiums include local taxes?

Insurers are legally required to collect insurance taxes for the Spanish Government, including the "Consorcio". The Consorcio provides cover against natural catastrophes, such as floods. If you sustain flood damage as a result of a natural disaster you claim against the Consorcio fund. Make sure your premium includes the relevant insurance taxes and the insurer pays them to the relevant government department on your behalf.

Other points to bear in Mind

Leave a key with trusted neighbours who can check your property frequently to reduce the risk of theft and damage. Although it's Spain, beware of freezing pipes in the winter months - winters in Spain can be as cold as the UK. Leaving the heating on (thermostatically controlled) can minimise water damage from burst pipes. Inform your insurer immediately of any alterations you make to your holiday home that affect the sums insured or risk.

Remember, just because your holiday home is out of sight, it really mustn't be out of mind. Before you buy insurance, ask for a copy of the full policy wording. Check for any exclusions and understand your obligations - some of which may be unreasonable. Hopefully this will prevent any unpleasant surprises in the event of a claim.

Consider all the points above when choosing Spanish holiday home insurance and you should be adequately protected. Choose a policy based on the value of cover - not price.

Next steps - Get an instant quote, view the house insurance in Spain policy details or compare our overseas home insurance.

For further guides and advice read our blog.

Disclaimer: this information should be used as a guide only and should not solely be relied upon. We advise that you read any insurance policy terms, conditions and exclusions thoroughly, seeking professional advice if necessary, to fully understand the extent of cover provided.