The risks associated with buying or financing real estate can be divided into three macro-areas: legal, technical, and related to the occurrence of damaging events
Only 24 percent of homes have “multi-risk” insurance coverage
Carbone: “Everyone, owners and renters, should protect themselves. Perhaps get an advisor to help save time and find the most suitable coverage for their needs.”
Protecting one’s real estate investment constitutes what Andrea Carbone, creator of Smileconomy, calls “a duty to ourselves and our loved ones.” Not least because, often, the most significant risks lurk precisely in retail transactions. With Carbone and Alberto Saiu (chief business development director of One Underwriting, Aon Group), We Wealth mapped the main ones.
When it comes to real estate, there are three elements to secure. “It starts with the building: protecting the physical integrity of our real estate unit from fires, floods, earthquakes, and anything else that can have a destructive effect, ensuring that we have the necessary resources to rebuild it back to new,” Carbone explains. “We then move on to protecting the property contained within (the risk of theft) and that of the people who frequent the home, family members, co-workers, and even animals.” In general, Saiu interjects the risks associated with buying or financing real estate can be divided into three macro-areas: legal risks, technical risks, and risks associated with damaging events.
Investing in real estate: legal risks
“Legal risks relate to the title of the property,” Saiu recounts. “Under certain circumstances, it is possible for the buyer of an asset to suffer harm if third parties have rights to the property.” The classic example involves a person purchasing a property of donative provenance. “If it is proven that the donation has adversely affected the rights of the donor’s next of kin, the so-called legitimate, they could take action against the person who received the property (and subsequent purchasers) to demand its restitution,” the expert explains. Donation policies, in this case, represent the market standard for protecting buyers of this type of property. According to data collected by One Underwriting, although this is a “niche” risk, there are more than 2 million donated properties. Approximately 25 thousand donated properties are bought and sold each year precisely because of policies that, with a single premium of about 900 euros to insure an asset of nearly 300 thousand euros, protect the insured until the statute of limitations on the rights of all legitimate citizens. Similar risks can also occur when purchasing the property from a will succession or a person claiming a right of usucaption over the asset.
Other legal risks can be traced to missing building permits or cadastral discrepancies. “An interesting case is that of altius non tollendi: the easement not to elevate,” Saiu relates. “This is an obligation under which the owner of the servient estate is required to build at a certain height. It is a very present issue in cities of art (in Italy, the rule). Owners of important buildings often claimed this right against neighboring funds. Over the years, these restrictions have often been violated, with the consequence of making the purchase of an asset built on an easement fund risky. In all these cases, there is the possibility of insuring against the economic losses the investor might suffer in case of a claim.”
Real estate: the technical risks to consider
On the other hand, technical risks concern the physical size of the property. And they happen much more often than people think: in Italy, firefighters put out a house fire on average every 15 minutes, while a theft occurs every five minutes, for example. In this case, “protection is offered by multi-risk insurance products, which are created to secure oneself on multiple fronts,” Carbone explains. “The investment to protect a 100-square-meter three-bedroom apartment in Milan can start at 20 euros per month and go up to 50 euros per month and more depending on the apartment (size, finishes, and floor, among other aspects), the type of coverage and one’s needs.” Yet, if you exclude fire and burst policies mandatorily stipulated with the mortgage, today, only 24 percent of households boast such coverage.
According to an estimate by One Underwriting (for a 100-square-meter apartment in Milan), for an insured sum between 150 and 200 thousand euros, coverage is around 250 euros annually. “Then you can add guarantees such as damage to contents, theft, third-party liability, and earthquake guarantee. Again, a big difference is made by the sums insured. For a property with the above characteristics, you can get to spend, for a good product including all guarantees, between 600 and 700 euros per year,” Saiu confirms.
Rent insurance: what it covers
“Once the legal and technical risks have been perimetered, the property must be lived in or put to income,” Saiu concludes. “In the first case, it is essential to protect yourself through a liability policy to avoid suffering financial damage if the property causes damage to third parties. If, on the other hand, one intends to put the asset to income, one must remember that 30 percent of landlords interviewed in a survey carried out last year by Emg Different claimed to have received one or more installments late. In comparison, 14 percent said they had missed one or more fees altogether. Among the various solutions to protect the landlord’s position, there are insurance coverages that can cover, in case of tenant arrears, up to 12 monthly payments in addition to the legal costs necessary to bring the court action for eviction for arrears.” So imagine insuring 12 monthly payments with a rent of 600 euros and a four-year contract with legal protection; the premium is again around 600-700 euros. To be paid in one lump sum for the entire contract term period.
