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Mandatory property insurance back on the table after floods

The debate on compulsory property insurance is back on the table in the shadow of the thousands of destroyed homes and businesses in  central Greece.

The proposal was tabled by the economic advisor to the Prime Minister, Alexis Patelis.

The low percentage of insured homes, which according to insurance market estimates is between 16% and 20%, contrasts the fact of the high proportion of owner-occupied properties and that the cost of insurance is relative low.

“It’s not easy, it’s not the solution to the problem, infrastructure costs money, but it also has a dimension of justice and the obligation can lead to lower insurance costs,” Patelis is being quoted as saying.

The mandatory insurance for buildings is a topic that is “heard every time a natural disaster causes extensive damage to an area and the state is asked to calculate the financial cost of compensation.

It is not the first time that this public debate has started, as there is already a relevant obligation in some regions of the country. However, this time there may be a more generalized application of such a mandatory obligation given the fact the the government has promised a 10% discount of the property tax ENFIA for insured buildings.

  • The discount for small property owners is, of course, a joke of let’s say 60 euros per year, when annual insurance cost is above €200.

In fact, according to the conditions included in the law, there must be insurance against all natural risks, which automatically excludes very old properties. Note that properties built before 1960 are not insured against earthquake risk.

It is worth noting that, today, real estate insurance is mandatory only for those who have taken out a mortgage.

However, in the event that the discussion continues, the insurance obligation will initially concern areas that are next to a forest, that are prone to earthquakes or that have increased risk of flooding, notes

At the moment, insured properties in Greece constitute only 16% – 20% of the total, while property insurance against the risk of natural disasters is already mandatory in several European countries.

Insurance Cost in Greece

The low insurance rate, which is even lower in provincial areas, has left the vast majority of properties in the country exposed to damage from natural phenomena, despite the high proportion of owner-occupied properties and the fact that the cost of insurance is low.

The average cost for home insurance in Greece ranges between 1.4-1.80 percent for post-2000 constructions and increases to 1.65-2.1 percent for older constructions from 1970 onward.

This is the premium paid to purchase 1,000 euros of insured capital. The ultimate cost is estimated on the basis of the reconstruction value for every 1,000 euros of insured value, which ranges between 1,100 and 1,400 euros based on market pricing, depending on the quality of the construction.

Thus, the cost of insuring a property with a surface area of, for example, 80 square meters, if it was built in 2000, is close to 145 euros per year (calculated at a reconstruction cost of 1,300 per sq.m.). Similarly, for a larger house of 135 sq.m., the insurance cost based on a reconstruction value of 1,400 euros per sq.m. is 260 euros per year if built in 2000 or 310 euros per year if built in 1975.

The basis of insurance coverage is fire, and all additional coverage, such as insurance against natural disasters and earthquakes, is built on this.

Additional natural disaster cover includes damage caused by floods, storms, natural disasters, tornadoes etc, most of which are included in the comprehensive packages offered by insurance companies, kathimerini noted in a relevant post.

PS One reason Greeks are reluctant to private insurance, whether in health or in buildings, is that some very bad ‘fruits’ intermingled in the insurance sector in the past, insurance companies declared ‘bankruptcy’ and their customers cried a river of tears and lost money.
*thumbnail picture: archive

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One comment

  1. I agree with your PS. When I first came to Greece a friend told me that nobody had fully comprehensive insurance on cars because if you ever tried to claim they would not pay and you would need to fight it through the courts, which could take years. I and all my friends have experienced car insurance companies going bankrupt and having to pay again to get cover.

    I would strongly recommend looking at who the underwriters are for whichever insurance company you choose. For my house, car and motorbike I use a big international insurance company which is underwritten by Munich Re, who claim to be the worlds biggest underwriter. Previously my house was insured with another international insurer underwritten by Lloyd’s of London, which I think is the world’s second biggest underwriter.