Home Insurance: How and Why to Protect Your Property

If you list your assets and possessions in order of importance, it is likely that you will put your house or residence first, due to its economic value. We all know the importance of protecting our home, taking care of it and repairing it when necessary, but to what extent can we protect it on our own?

However, this importance is not reflected in practice. Although the figures improve every year, according to the last Encuesta Nacional de Inclusión Financiera (National Survey of Financial Inclusion) only 25 percent of the adult Mexican population has some type of insurance, and of those, 75 percent have life insurance, 32 percent have auto insurance and 27 percent have medical insurance, while only 6 percent of homeowners have home insurance. These figures are even lower according to the Asociación Mexicana de Seguros (AMIS) (Mexican Association of Insurance), which indicates that only 4.5 percent of Mexican homes are insured without being linked to a mortgage loan.

To learn the importance of securing our home in the face of various mishaps, we spoke with Roberto Castellanos Omaña, international general manager of Novamar Insurance Mexico and a prominent member of the national board of directors of the Asociación Mexicana de Agentes de Seguros y Fianzas, A.C. (AMASFAC) (Mexican Association of Insurance and Bonding Agents), who clarifies some points about the different types of policies, their coverage and their characteristics, the most frequent risks and misconceptions about home insurance.

According to Castellanos, contracting a policy for your home is a very important decision. “Your property is your most valuable investment. Both the structure and its contents have great value, and insuring them is the way to protect them, as well as the security of your home and your family. When you are going to contract a policy for your home, you must consider two things: the value of your assets—both the property and its contents—and the risks you face.”

Most Frequent Risks

“Not having insurance can leave you unprotected in the event of major catastrophes to which we are not strangers, such as an earthquake or hurricane, which can leave you without the assets for which you have worked so hard throughout your life.” However, discounting extreme or peculiar cases, there are more common risks in the Vallarta · Nayarit area. “Between May and November, hydrometeorological phenomena cause frequent damage from rain and water, including leaks and floods, winds that blow away parts of roofs, windows that break during storms or, in August and September, lightning damage that can cause fires and short circuits.”

Castellanos says thefts are one of the most common dangers. “While they do not harm your property, they can leave you without your appliances and other valuables. Normally, the property that is insured inside a home includes furniture, electronics and mobility equipment—for example, a bicycle or a laptop—and pieces of great value such as jewelry and art.”

Basic Coverages a Policy Should Contain

Normally, home policies cover the following items: the building and its contents, theft, electronics and appliances, breakage of both machinery and glass and, of course, liability. Many policies also include premium or special coverages, such as for pets.

House or Apartment, Are There Differences?

When contracting a policy for your residence, one of the characteristics considered is whether it is for a free-standing house or an apartment in a complex. “If it is a house, you have to cover the entire structure, as well as the contents. However, if you live in a condominium, maintenance fees ideally should include building insurance, so you should insure only the contents. To make sure, it is advisable to ask the administrator to show you that there is a master policy for the building and that it is paid,” says Castellanos.

Owner, Landlord and Tenant, Who Should Insure the Home?

There are some differences between ownership and rental, says the director of Novamar. “If you are the owner of the residence in which you live, you must take into account all the elements and risks, since damage to the house and the interior directly affects you. One recommendation is to look for coverage of extra expenses if you must leave your home due to some mishap—the cost of a hotel or renting another house. And do not forget liability, in case you are responsible for harm to a neighbor.”

“If you are an owner-landlord, you are interested in covering the structure, but not the tenant’s contents. In addition, liability coverage should be included in case something happens inside the property, because, although you are renting it out, you are still responsible as owner. Also, it is important that the policy covers loss of income, because if there is significant damage, your tenant will leave.”

“On the other hand, if you are a tenant, what you are interested in is securing your furniture and equipment, so you will not insure the house—ideally, the owner should have done it. However, what happens if while using your laptop it causes a short circuit and damages the property? For these cases, it is recommended to include a tenant liability clause that covers the construction value of the house, something that is normally included in the lease agreement,” explains Castellanos.

Myths and Misconceptions, What is the Reality?

There are certain urban legends regarding the utility of home insurance, in addition to misconceptions about its cost. However, Castellanos says that many of these ideas are totally wrong.

“In Mexico, the concept of protection is not yet integrated into society. Ask someone, regardless of their socioeconomic status, whether they have their home insured, and they will say no, because ‘nothing is going to happen.’ In Europe, the United States and Canada, the concept of protection is deeply rooted. In Mexico, there is the idea that, if something happens to the neighbor, ‘we will see how we can fix it.’ For foreigners, buying a house and taking out insurance are two concepts that go hand in hand. It is a question of priorities. Many think the cost is prohibitive and do not contract it, but they do not hesitate to invite all their friends to eat or live together. The reality is that it is not a costly expense at all, just slightly higher than auto insurance. And if you do the calculations, for a similar amount, you are insuring an asset immensely more valuable than a vehicle. In addition, few know that it is not necessary to ensure 100 percent of the house; you can choose how much and what elements of your property you insure.”

Finally, Castellanos clarifies, “The idea that having an insurance policy is useless, because ‘I will not use it’ or ‘insurance does not pay’ or ‘the fine print’, must be changed. Whether for a small incident or something serious, you will use the policy. It is important that people see it as something protecting their most precious assets and realize that by just adding a bit to their annual budget they will not run the risk of everything disappearing overnight.”