Arno Suls

Are you paying enough attention to insurances in your real estate transaction?

By Arno Suls, Construction Advisor at Concordia

The purchase of a real estate remains for many the most important investment of their lives. As an insurance broker, we too often conclude that insurance is only seen as a formality in real estate transactions. An unfortunate matter as the risks of being insufficiently or not properly insured are immense.

Accident insurance

It seems evident that buyers when entering into a home loan, insure the outstanding balance in a debt balance insurance policy. But what if one dies after signing the agreement but before the execution of the deed? After all, the agreement is binding thus it binds any surviving partner and/or legal heirs of the victim to the purchase. The financial consequences may not be foreseeable.

Fortunately, as a real estate agent, you can easily protect your buyers with a specially designed death insurance. Such coverage gives all parties the necessary peace of mind and comes without many formalities. Moreover, it costs less than 5 EUR per transaction — a small price for a lot of comfort.

Fire insurance

Then there is the insurance of the building itself. The details about who must insure when are usually well-agreed upon in the agreement, but also pay sufficient attention to the insurance itself. Advise the buyers to inform themselves in a timely manner by a professional so that they can enjoy their purchase in all security.

The real estate vendor

Are you selling apartments in a block or homes on plan? Then you may have noticed that the different parties involved often have a different vision regarding insurance.

In the case of apartments, sufficient attention should be paid to the block policy and how the individual fire insurance policies of tenants/residents are geared to this. Particularly pay attention to a possible 'waiver of recourse' and possible gaps or overlaps between the various policies. In contrast to the principle 'every man for himself', a centralized approach to insurance offers many advantages and removes the problem of overlap explicitly.

For a sale of housing on plan, we notice that the real estate agent also increasingly plays an active role in the process. Organize a meeting in which a general insurance strategy for the entire project is discussed. Appoint one party (promoter, syndic, project company etc.) who manages this centrally and uniformly insures everything according to the agreed strategy. Policies that will often be discussed are all construction site risks, ten-year liability and fire. As a general principle, you can assume that such policies should be endorsed as centrally as possible. This way you can keep an overview, enjoy better conditions and avoid gaps and overlaps of guarantees.

A good example from our practice is a real estate agent/ project developer who bought a small old industrial building. The project included a lot of demolition works, followed by a thorough restoration of the existing building and the construction of new homes, apartments and an underground car park. The site of the property was labeled as cultural heritage, and was, therefore, subject to specific regulations.

The project team consisted of the real estate agent/project developer, an architect and three large contractors. In the first instance, each party was properly insured; nevertheless, the coverage was not optimal. Since everyone was playing in the same arena, there were many overlaps in covers. Certain other risks, on the other hand, were found to be insufficiently covered or very inefficiently. For example, it would often be unclear who was liable in case of damage to a third party and changes in the project or requested cover should always be attuned to three different insurers.

The solution? The parties involved worked out a single central insurance strategy in which all risks were covered across the board. In addition to a financial benefit, this approach resulted in a more comprehensive coverage, better conditions and easier administrative management. Moreover, the project developer could rest assured that any damaged third parties would not have to deal with the hassle of finding the liable contractor, but would be helped quickly, which is important for his image as a sustainable developer.

CONCLUSION

Justly, a lot of time and energy is invested in the purchase and sales process of real estates. Unfortunately, the insurance policies are often neglected. However, the timely, accurate and correct insurance of real estate is the key to success in avoiding surprises in the event of a breakdown or an accident. Assure yourself and customers of flawless service and contact your insurance broker.

Arno Suls
Construction Advisor
0032 499 90 00 20
asuls@concordia.be