Do you need a change of ownership insurance when buying a new home?
Do you need a change of ownership insurance when buying a new home?
What is a change of ownership insurance?
A change of ownership insurance is an insurance policy that covers hidden defects and defects of a property which were present at the time of purchase but were not discovered during the building technical review (condition report and electrical installation report). Insurance typically covers the cost of correcting these defects and deficiencies.
The change of ownership insurance is often taken out in connection with the handling of the purchase agreement and is based on an agreement between the seller and the buyer. However, it is important to note that the seller is only obliged to offer a standard change of ownership insurance and to pay half the premium. If the buyer wants a more comprehensive insurance policy, they will have to pay the extra cost themselves.
Is change of ownership insurance compulsory?
The change of ownership insurance is not required by law, but it is an important part of the legal system around real estate in Denmark. If the seller offers a change of ownership insurance and pays half the premium, the seller disclaims his 10-year liability for hidden defects and defects of the house. The buyer must assess for himself whether the insurance is necessary, but many choose to take it out to protect themselves from unforeseen expenses.
What does a change of ownership insurance cover?
Coverage varies from insurer to insurer, but most change of ownership insurance policies include:
- Hidden flaws and shortcomings of the building, which were present at the time of acquisition.
- Damage to the structure of the building, e.g. leaking roofs or defects in the foundation.
- Illegal installations in the field of electricity and plumbing.
Extended change of ownership insurance may also cover:
- Conditions outside the building, such as errors in sewerage or pollution.
- Increased spending on energy improvements if the building fails to meet expected standards.
Advantages of taking out a change of ownership insurance
1. Economic security
Unexpected defects and defects can be extremely expensive to fix. A change of ownership insurance provides financial security and ensures that you do not have to pay for damage that you could not have foreseen when buying.
2. Risk mitigation
Even with a thorough review of the condition report, there may still be hidden problems. Insurance reduces your risk and ensures that you are not left alone with the responsibility for errors and omissions.
3. Legal security
With a change of ownership insurance, you avoid legal conflicts with the seller, as responsibility for hidden defects passes to the insurer.
Disadvantages of change of ownership insurance
1. Limited coverage
Change of ownership insurance does not cover everything. For example, injuries caused by ordinary wear are not included. In addition, insurance often does not cover cosmetic defects.
2. Self-risk
Most change of ownership insurance policies have a deductible that you have to pay every time you make use of the insurance. This can become expensive if there are many minor flaws and defects.
3. High premium
The price of a change of ownership insurance can be high, depending on the condition and age of the property. It can be a significant expense on top of the other costs of house purchase.
When is a change of ownership insurance particularly relevant?
A change of ownership insurance is particularly relevant if:
- The property is old and there is a risk of hidden defects.
- There are unclear conditions in the condition report which may indicate potential problems.
- You do not have experience in building maintenance and want extra security.
When can you consider opting out of insurance?
In some cases, you can consider opting out of the change of ownership insurance:
- If the property is newly built and covered by a construction damage insurance.
- If the condition report shows that the house is in exceptionally good condition.
- If you have a high risk appetite and are willing to take responsibility for any mistakes and shortcomings.
How to choose the right change of ownership insurance?
To choose the right change of ownership insurance, you must:
- Obtain offers: Compare offers from several insurers to find the best price and coverage.
- Read the policy carefully: Understand what is included and excluded in the insurance.
- Consider extended coverage: Assess whether extended change of ownership insurance is necessary for your situation.
Conclusion
A change of ownership insurance is not required by law, but it can be an important investment to protect you against the unforeseen costs of house purchase. It is a balance between risk and finances, and the decision depends on the condition of the property, your personal needs and your risk appetite. By taking the time to explore the options and understand what insurance covers, you can make an informed decision and ensure yourself a safe start in your new home.
