INSURANCES: WHO INSURES WHAT?
Housing Company, Owner of shares, Resident/Tenant, who insures what?
This is an outline of what each party in the housing company can insure. A more detailed description of the possessions covered by an individual insurance is given under individual insurances (home/property/liability).
Those living in a row house, block of flats or other housing company usually insure only their movable property. The housing company has property insurance for the buildings.
Many liabilities in a housing company are based on the Limited Liability Housing Companies Act or the Articles of Association of the housing company. There is a division of liabilities in a housing company and the maintenance responsibility which are consistent with the Limited Liability Housing Company Act and referred to in the policy conditions.
With property insurance, the housing company may insure the structures of the building and possibly the loss of rental income. The housing company cannot insure the residents' movable property.
For example, in the case of extensive water damage, from the property insurance, the housing company may receive indemnity for repair of damaged structures and, if the insurance contains interruption coverage, for loss of rental income of a street-level shop due to the water damage.
Housing Company Shareholder
A housing company shareholder, who lives in the apartment he/she owns, may insure his/her movable property and fixtures in the apartment with a home insurance.
A home insurance covers also e.g. compensation for interruption of residency, i.e. indemnifies costs caused by having to move out of the apartment due to a damage covered by the insurance.
When a shareholder acts as a lessor, with home insurance he/she can insure the fixtures and the movable property he/she has in the apartment. However, the insurance company needs to be notified of the fact that the apartment is being let. The policy conditions may also contain special limitations regarding damages caused by tenants. Such a limitation condition may be e.g. that the insurance will not cover any damage resulting from the tenant's deliberate or aggravated negligence.
An ordinary home insurance does not cover loss of rental income. Possible loss of rental income due to damage is typically part of the risk involved in investment in housing. Insurance companies may offer an insurance that would indemnify loss of rental income in case of damage as well as damages caused by tenants.
The tenant can insure his/her movable property and also the fixed interior decoration of the apartment with a home insurance. Also the tenant's home insurance includes indemnity for interruption of housing.
The tenant may be liable to indemnify the housing company or shareholder for damages. A tenant may take a liability and legal expenses insurance in addition to a home insurance. This condition may be and is often written to the rental contracts.
Liability and legal expenses insurance
The liability insurance indemnifies expenses for which the policy holder is liable. Legal expenses insurance covers legal counsel expenses in litigation, criminal law or application processes.The tenant and shareholder or house owner can take a liability and legal expenses insurance in addition to the home insurance.
Often the lessor requires that the tenant has a valid home and liability insurance. If the tenant causes damage to the structures of the let apartment or house, under certain conditions, the liability insurance may indemnify costs caused by the damage.
Also the housing company can supplement the property insurance with liability insurance to cover costs that the housing company may be liable for due to e.g. defective maintenance of passageways. Also the housing company administration can be covered by liability insurance.
Home insurance of a housing company resident
The home insurance is valid in the location given in the insurance policy. The object of the insurance is usually the possessions of the policy holder and of other persons permanently resident with him/her in the same common household.
The home insurance is a voluntary insurance, which means that signing a home insurance policy is voluntary from the insurance company's and the customer's side. However, often the lessor requires that the tenant has at least a valid home insurance and liability insurance.
The insurance is an agreement between the policy holder and insurance company with policy conditions showing its content and insurance policy indicating the information on the objects and sum insured. An insurance brochure provides information on the coverage and essential limitations of the insurance. The insurance agreement determines the amount for which the possessions are insured. Like the property insurance, also the home insurance may be full value insurance or insured amount insurance.
A full value insurance does not indicate a predetermined maximum amount of indemnity, but the value of the damaged possessions is determined after the damage has occurred.
In insured amount insurance, a certain amount is insured, which usually should correspond to the replacement value of the possessions. Full value insurance does not mean that the indemnity for damaged possessions corresponds to their value when new.
The risk of underinsurance is small in full value insurance, if the insurance company has been given the correct information. The possessions are underinsured, if the insured amount in the insurance policy is significantly smaller than the correct value of the insured possessions. In underinsurance, the customer is indemnified only that share of the damage, which is indicated by the proportion between the insured amount and the value of the possessions.
The possessions are over-insured, if the insured amount in the insurance policy is significantly larger than the value of the insured possessions. In case of an accident, the customer will not benefit monetarily from over-insuring.
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