GCC Residents Urged to Review Their Property Insurance Before Leaving Homes Unattended Over the Holidays

Home-Owners, Tenants Need to be Aware Vacant Properties at Risk from Dangers such as Fire, Flood, Storm Damage, and/or Theft, says Nexus Group

DUBAI, United Arab Emirates: Gulf residents preparing to go away for the holidays need to ensure their home insurance coverage is sufficient to cover the risks when leaving their property vacant for an extended period, according to Nexus Group, the region’s leading insurance broker.

Property owners and tenants need to ensure that they have adequate protection in the event their property is damaged or burgled while they are away. Not only does leaving a property unattended increase the risk of actions such as theft, but the effects of an accident or disaster happening can become magnified if there is nobody there to deal with the consequences.

“All too often, we see that people in this part of the world underestimate the importance of home insurance. If they do have any form of insurance, they often don’t pay attention to what it does actually cover, until it is too late,” said Alison Fenech, Head of General Insurance at Nexus Group.

“Tenants often assume that their belongings are covered by the landlord’s insurance, which usually only covers the actual building, while a new property owner may not make insurance coverage a priority. There is a definite need for better understanding of the importance of home insurance in the region.”

Many people believe that because natural disasters are less likely in the region, there is no need for protection, Fenech said. However, a number of other risks that residents might not be aware of could also lead to disastrous consequences.

For example, flammable items left near the window under the blazing sun, or a short circuit could trigger a fire. Without anyone home to put out the flames or alert the fire service, a small flare could grow into a large blaze that may prove devastating.

In addition, a burst pipe is a problem at any time, but if nobody knows how to turn off the water supply or call a plumber, the damage may be much worse.

When such disasters strike, returning holiday-makers receive an unwelcome surprise when they get home – and if their insurance coverage is not enough to cover the damage, that surprise can turn into a devastating financial blow.

While products such as motor insurance are mandatory across the GCC, and countries are adding regulations on health insurance, property insurance is usually not covered by a regulatory policy. A bank may insist on building insurance before granting a mortgage, but items such as contents insurance are usually optional – and therefore often not taken by residents hoping to make a saving. This can prove a very costly mistake if the worst does happen.

“People often don’t think about what they need for adequate coverage,” Fenech added. “For instance, when taking out home insurance, it’s not the cost of buying your home but the costs of rebuilding it that you need to insure against, and that could be less than the original cost of purchasing the property.”

Rebuilding a home damaged in a disaster may require clearing away the damaged property before rebuilding can start, while residents may also need to look at the cost of finding somewhere else to live while the work is being undertaken.  All of these expenses can quickly mount up and may become overwhelming without adequate coverage.

A property insurance policy that covers an apartment or villa may extend to include home-contents insurance that covers a tenant’s or home-owner’s belongings. The cost of home-contents insurance, which depends on the sum insured, is often overestimated and affordable, says Fenech.

For example, for an apartment with a contents sum insured of AED 60,000, the annual premium would be an estimated AED 180, while for another apartment with a sum insured of AED 300,000, the annual premium would be about AED 900.

“The premium is not based on whether the contents are in a villa or in an apartment, but rather the value of the possessions,” Fenech said.  “It is a small price to pay given the risks.”

Other criteria that may affect the premium of home-contents insurance, and that many insurers take into consideration to assess risk, include the location of the property, its occupancy, loss and accident history, nature of the property, and the purpose of its use.

If residents are planning on taking a lengthy stay away, they may also need to check that their insurance coverage will allow it, with many insurers having limits on how long a property can be left unoccupied.

For contents insurance, customers need to be aware that more expensive items may need to be specified on the policy to be covered – and some big-ticket items may need to be insured separately. While that may increase the cost of the premium, skimping in this area may again leave people unable to cover the replacement costs.

“At the end of the day your home is your home,” Fenech said. “Shelter is the most important thing to have in everybody’s life so we all need to make sure we look after it.”