When buying your property in Malta, the importance of taking out insurance shouldn’t be overlooked. In fact, if taking a loan from one of your local banks, insurance is by no means a choice but a mandatory requirement. Just as you need to have peace of mind to cover your own assets, the bank also requires some form of collateral. Insurance safeguards both the lender and borrower, in unforeseen and unfortunate circumstances.
There are two kinds of insurances the bank asks for, these are: Life Insurance and Home Insurance.
This type of insurance is referred to as Decreasing Life Cover or Decreasing Term Insurance and is a requirement when finalising a bank loan. As the name of the insurance implies, the cover is designed to decrease over the term of the policy, largely matching the unpaid loan amount. Since any potential pay-out declines over time as they are consistent with the repayment mortgage, the premiums remain the same.
You will discover that the premium of a Loan Protection Life Insurance policy is cheaper than a Level Term Life Insurance. In layman’s terms, the policy ensures that in the event of your passing, the loan is paid off in full and thus provides financial security for your loved ones, so they will not be left without a home or having to make radical changes like moving home.
There are always possessions that need to be protected. Home insurance puts the homeowner’s mind at rest in knowing that in the worst case scenario, costs of repairing or replacing the things one values could be covered. It’s always wise to save for a rainy day, and this kind of insurance covers you in case of fire, theft or acts of God. Expanding on that last point, typically only some acts of God are covered under standard homeowners policies. Damage due to wind, rain or hail is covered, however damage due to earthquakes, volcanoes and floods generally isn't.
Home Insurance can be further divided into:
- Buildings Insurance: covers actual rebuilding costs of your property including any fixtures and fittings such as apertures, doors, bathrooms, solar water heaters, photovoltaic panels, alarm systems, fitted air conditioning units and fitted kitchens. Just like the Life Insurance, this type of insurance is a necessity when taking a home loan with your bank.
- Contents Insurance: covers the replacement value of all moveable property within your home, this includes furniture, household goods and personal belongings which belong to you or for which you are legally responsible for. If you own certain high valued possessions such as jewellery, silverware, works of art, curios and collections, your insurer has the right to ask you to specify said items in further detail.
Benjamin Franklin famously wrote there are only 2 things certain in life: death and taxes. Perhaps we should add a third certainty: insurance?