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Many people ask if you need home insurance when buying a house, as other buyers have said that it is mandatory when signing a mortgage agreement.

To clear up any concerns you may have about this, Terra Homes explains if you need to contract a home insurance policy.

Do you need home insurance?

There are no legal requirements in Spain forcing you to have a home insurance policy. There is only one case in which a home insurance policy is necessary: when you sign a mortgage agreement to buy a house with a bank, as this is subject to article 10 of the Royal Decree 716/209.

But this must only be in regard to a mortgage, as if you are applying for a personal loan you will not need a home insurance policy.

Is it mandatory to contract a home insurance policy with the bank?

If you are contracting a home insurance policy with a bank to buy a house, you need to have home insurance. But the question is, do you also need to contract the insurance policy with the same bank?

Years ago, many banks forced their customers to contract home insurance policies with them if they wanted to be granted a mortgage. They even made the excuse that if the insurance was included in the agreement the mortgage would be cheaper.

However, this practice ended with the European Mortgage Credit Directive approved by the European Parliament at the end of 2013, which expressly prohibited mortgages being linked to home insurance policies. Therefore, despite it being mandatory to have a home insurance policy to access a mortgage, said policy does not need to be with the same bank with whom you have your mortgage.

If my house is paid off, is it still mandatory to have home insurance?

Those people who have paid off their home are not obliged to have home insurance. However, it is highly recommended, due to two main reasons.

The first of these is that if there is any third-party damage caused to the home, these insurance policies will cover any liabilities that may arise. For example, let’s imagine that we have a flat and there is a fire that causes serious damage to a neighbouring flat, for which we have no way of paying. The home insurance will take care of this, and we will not have to go into debt.

The other reason for having a home insurance policy in placeto protect our home in case of any accidents or damages being caused. When the damages are down to some kind of natural cause, the insurance will not cover these, however the Guarantee Fund shall.

If you are renting a house, do you need to contract home insurance?

When renting a flat or house you may have to contract home insurance,if this is mandatory under any of the rental agreement clauses. In any other case, it should not be necessary.

What does home insurance cover?

When contracting a home insurance policy it is important to check what is included in the basic coverages, which all of these insurances should include. It should include liability, water and fire damages, and any expected claims that usually occur in homes.

Likewise, the home insurance policy should also protect the premises, which is the entire structure of the house (from the roof to the fittings). It should also protect the content, including significant personal property inside the home such as jewellery, household appliances, and furniture.

In regard to liability, these insurance policies usually only cover damages caused by the policy holder to third parties. However, recently, they often also include coverages for animals, which are increasingly more popular in Spanish homes.

In conclusion, unless you are buying a home with a mortgage, or you are renting a home and the rental agreement states that you have to, there is no obligation to contract a home insurance policy. However, it is recommended to be covered from any possible damages that may arise in the property and those which may be caused by third parties.

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