The main concepts of your home insurance policy

Buildings are those items that define and form part of the empty home and its outbuildings (foundations, floors, inside and outside walls, ceilings, roofs, bathrooms, doors, windows, blinds, awnings, electrical installations, water installations. etc.).

The contents refer to the furniture and the remaining objects insured under the policy.

Easy-to-follow rule: imagine that you place your home in the palm of your hand and you turn it upside down - everything that does not fall out is contents.

Based on what you have in your home, you must insure one thing or another. For example, if your home is being rented out and none of the furniture is owned by you, you can save on contents insurance.

Aesthetic damage is that which affects the original aesthetic characteristics of a home and is caused indirectly, either by a claim or as a result of repairs thereto.

Home insurance policies include an option to take out protection to cover these flaws to fixed installations in the event of claims; hence, if, for example, it is necessary to break the bathroom and the same tiles no longer exist, all the tiles can be changed, limited to the same room and up to the amount stipulated in the protection.

We talk about underinsurance when something is insured for an amount below its real value.

In the cases in which underinsurance occurs, when dealing with a claim, it will be compensated by applying a proportional rule. This rule will have the following formula:

Indemnity = Insured capital x amount of the damage / value of the insured items.

The opposite case can also occur, that is, when we insure something above its real value, what is known as overinsurance. In those cases, the insurer will pay compensation at the real value of the insured item and not for the insured amount, since it would generate an illegal enrichment on the part of the insured party.

Now that you have these concepts clearer, you can see everything offered by our home insurance policies here. 

To determine the most adequate amount to insure for the building portion of your home, it’s of utmost importance to calculate the reconstruction value rather than the market value. The market value is the price you could sell your home for on the open market; the physical structure and the land it sits on. On the other hand, the reconstruction value is the amount required to completely rebuild your home from scratch in the event of a total loss. Therefore, the land value is never included, since in a disaster, the land itself is neither destroyed nor lost.

The main criteria to bear in mind are:

• Built square meters: the total size of the home is the primary factor. It includes all rooms, annexes such as storage rooms or garages, and communal areas if they are your property.

• Quality of materials: a home constructed with high-end materials (marble, fine woods, premium fixtures) will have a higher reconstruction cost than one with standard finishes.

• Construction characteristics: elements such as the type of structure, number of floors, whether it has a swimming pool, garden, central heating or air conditioning system increase the reconstruction value.

• Geographic location: the cost of construction varies depending on the area. Large cities tend to cost more than rural areas.

For reference, the current average reconstruction cost in Spain ranges from €600 to €1,200 per square metre, though it can be higher for luxury homes or in certain locations. 

The contents include all the personal belongings inside your home. To calculate the appropriate amount, we recommend drawing up a detailed inventory of your belongings, taking into account:

• Furniture: sofas, tables, chairs, beds, wardrobes and all the furniture in all the rooms. You must value your possessions based on what it would cost to buy them today, not what you paid when you first acquired them.

• Household appliances: refrigerator, washing machine, tumble dryer, dishwasher, oven, microwave, TVs, stereo equipment and other electronic devices.

• Personal items: clothing, footwear, books, toys, kitchenware, bedding, towels and other everyday items.

• Valuables: Anything valued at over €3,000 must be insured through optional coverage up to €10,000. All valuable items that do not exceed this individual value are included in the contents insurance.

• Jewellery: Jewellery with an individual value exceeding €400 must be insured with optional coverage up to €10,000. All jewellery that does not exceed this individual value is included in the contents insurance.

• Garden furniture. Optional coverage up to 5% of the total insured furniture value.

• Legal protection: Optional coverage for second homes.

A simple way to estimate the value of the contents is to use €300 to €500 per square metre of living space as a starting point of, adjusting later based on your specific circumstances. We recommend drawing up an inventory room by room for greater accuracy.

We also recommend keeping receipts, photographs and documentation of the most valuable items, to make any future claims more straightforward.

Properly insuring both the building and its contents in your home insurance policy is of utmost importance for several reasons:

• Adequate coverage should an event arise: if the insured amounts are insufficient, the payout will not cover the total amount, so the insured will have to bear the cost to make up the difference.

• Application of the proportional rule: this rule is applied in the event of underinsurance, reducing insurance payouts when an asset is insured for less than its actual value, meaning the insurer only pays a portion of the claim.

• Avoid unnecessary costs: overinsurance means paying higher premiums without getting more protection, since you never receive more than the actual value of the damaged property.

• Peace of mind and asset protection: being insured for the right amount ensures that, should any unforeseen circumstance arise, you can recover your standard of living without affecting your family's finances.

• Compliance with mortgage requirements: It is standard practice for banks and mortgage lenders to require that the building be insured when a mortgage has been taken out.

Periodically reviewing the insured amounts (we recommend doing so every 2-3 years or after major renovations) ensures that the coverage keeps pace with the situation of your home.