When Double Insurance for Your Home or Apartment Makes Sense: An Expert Explains

IN Internet articles on insurance topics often contain information that double insurance only makes sense in the case of life protection or health. We can often find out that buying a second insurance policy protects e.g. a house or premises will be unprofitable. Generally this is true, but… not in in each case. It is worth taking into account the situation of borrowers.

Experts from the Unilink insurance multi-agency explain why owners mortgage loans sometimes, despite everything, they should buy a second policy protecting the mortgaged property (in addition to the assignment insurance required by the bank).

At the beginning it is worth referring to the regulations Civil Code, which regulate the issue of double property insurance. Thanks to this, we can better understand where the above-mentioned argument comes from. talking about the pointlessness of buying two policies to protect one house or local. "Of key importance in this context is Article 824 ¹ Civil Code" - informs Andrzej Prajsnar, an expert from the multi-agency Unilink insurance.

The mentioned provision of the Civil Code (Art. 824 ¹ ) indicates that in the case of insurance of the same subject of protection in at least two companies (for the same risk and for amounts exceeding total insurance value of the item), the policyholder will not be could demand payment of a benefit greater than the value of the damage. "According to the general rule regarding property insurance is that the insurance benefit cannot be higher than damage suffered by the injured party" - explains Beata Borkowska, an expert from an insurance multi-agency Unilink.

In accordance with the provisions of the Civil Code (Art. 824 ¹ par. 2), in the event of double insurance of the item for the sums exceeding its total value, the companies shall bear a proportional responsibility. The decisive factor is the proportion of the insurance sum from a given policies for total amounts resulting from double or multiple insurance.

Another exception is of greater practical importance. from the principles described above. Namely, with double insurance real estate (or other thing) we are not dealing with in the case of insurance property interests of different persons relating to the same good, and also in the case of concluding several complementary insurance contracts, i.e. mutually complementary scopes of protection [see: D. Maśniak [in:] Civil Code. Updated commentary, ed. M. Balwicka-Szczyrba, A. Sylwestrzak, LEX/el. 2024, art. 824(1)].

The above principle is confirmed by the Court's Resolution Supreme Court of 30 November 2005 (reference number: III CZP 96/05). We read there that the principles set out in Article 824 ¹ paragraph 2 Civil Code (related to double property insurance and payment compensation) do not cover situations "in which property interests insured persons who are the subject of insurance are different, even if refer to the same property asset."

Typical double insurance does not occur, when the mortgaged apartment was covered by one policy that de facto protected the bank's property interest (due to the assignment) and the second insurance providing real protection for the borrower. "We are talking about a common situation, in which the lender requires not only insurance for the house or apartment, but also the assignment of rights to compensation from the policy," adds Beata Borkowska, an expert at the Unilink multi-agency.

It is hard to hide the fact that home insurance is the assignment to the bank protects the financial interest of the lender, despite covering the costs contributions by the borrower. In the event of a large loss, the bank will receive compensation to compensate him for the risk related to the loss of value of the property mortgaged. Banks' policy regarding the requirement to have property insurance in connection with the granted credit and assignment it is however, it varies. "It is not uncommon, for example, for a situation in which the assignment of rights concerning compensation includes payment of the policy benefit up to the current value granted credit, but maintaining the borrower's right to receive "small compensations (e.g. up to PLN 5,000)" – Andrzej Prajsnar points out, Unilink expert.

Quite often there is also a case in which the borrower purchased a policy with the lowest possible insurance amount accepted by the bank (e.g. close to the current value of the loan). "Bank customers often they also choose the narrowest possible scope of protection for credit insurance (e.g. only wall protection) assuming that they will buy it for their own needs "another home insurance" - comments Beata Borkowska, expert Unilink insurance multiagency.

A large group of borrowers understand that credit a policy with a low insurance sum will not provide them with real protection. A greater People with a large own contribution are motivated to buy a second policy, who have purchased the required property insurance with a minimum amount specified by the bank (e.g. equal to the value of the loan). Such a situation results in a lack any protection for the excess over the current value of the liability "In the event of a total loss, the assignment of the policy will ensure repayment remaining credit debt, but a large part of the damage will not be compensated" – warns Andrzej Prajsnar, Unilink expert.

Another possible problem for the property owner is reduction of the payment for smaller damages due to underinsurance. It is worth to emphasize that in the case of underinsurance of a flat or house does not apply the so-called principle of proportion.

It should be recalled that the principle itself insurance proportions generally apply in the event of underinsurance, when the insurance sum is lower than the actual value of the insured person property, which may result from its incorrect or intentionally underestimated value estimates. As a consequence of applying the principle of proportion, the amount paid by the insurer's compensation is reduced in the same proportion as what insurance sum corresponds to the value of the insured item on the day damage (and not the conclusion of an insurance contract).

In order to avoid problematic situations, it is possible to buy a second home insurance policy. Another option is to an appropriate increase in the amount of the required insurance, which is related to credit. "For clients of a large number of banks, a high insurance sum (equal to the value of the property) will be mandatory because some lenders do not they accept insurance amounts only at the level of the loan value" - emphasizes Andrzej Prajsnar, multi-agency expert Unilink insurance.

When taking out a mortgage loan, it is also worth considering Please note that the home insurance policy required by the bank usually covers only walls in case of fire, flooding, lightning strike or power surge. Equipment movables against damage and theft can be insured separately with a second policy. No we have to conclude it with the insurer indicated by the lender. This especially important in the case of valuable items such as electronics, antiques or works of art.

All the issues described above can be seem complicated to future and current borrowers. However, this does not change the fact that insurance coverage in in relation to the property acquired for credit is a very important topic. It is good to discuss it with both an insurance agent and a credit advisor before taking out a loan credit. Only then will it become clear which option is the best. "We are talking about an extended policy from a bank offer or cheap wall protection for the purposes credit and a second, broader insurance or an appropriately extended policy outside the bank's offer that the lender can accept," Beata sums up. Borkowska, expert at the Unilink insurance multi-agency.

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