Home Fire and Natural Disaster Insurance From INS
The National Insurance Institute’s home fire and natural disaster insurance policy is known as Hogar Seguro 2000. This policy can be used only for single-family dwellings; it can’t be used for commercial or industrial buildings, apartments, duplexes, etc., which must be insured with another type of policy.
Hogar Seguro can be used for standalone houses, semi-detached or adjacent. It can also be used for residential condos, but only condos of the type where there is a large tract of land with several houses within – not the type of condos where you have apartments stacked like pancakes.
The policy has four categories of coverage: “A” is for fire and lightning; “B” covers damage caused by strikes, vandalism, hurricane, cyclone, explosion, smoke, falling objects and vehicles; “C” pays for damage caused by floods and landslides; and “D” covers natural disasters such as quakes, tremors, volcanoes and tsunamis. C and D are sold jointly. You can take coverage A by itself, AB, ACD or complete coverage, ABCD. Most people go for the latter.
Coverage can be in colones or dollars. The rates are similar, and my advice is to use dollars. Exact rates depend on the seismic risk of the district where the house is located; the National Insurance Institute (INS) has classified the entire country and established the rates accordingly. Rates for ABCD range between 0.21 and 0.31 percent, including tax. Example: The premium for a home valued at $100,000 in a non-high-risk area would average $260 to $270 per year, including tax. The rate is applied to the insured value.
INS puts the onus on the insured or applicant to determine the value at which to insure, based on the estimated rebuild cost less depreciation for every year since the house was built or extensively refurbished, at the rate of 2 percent per year for wooden buildings or 1 percent for masonry buildings.
OK, but who really puts a value on the house? Your agent is forbidden to do so. If you have recently built the house, use the cost of construction. If the house is older, you can have an appraisal done – these are usually fearfully expensive – or you can invite your friendly builder to visit and, over a glass of something nice and cool, ask him how much “this type of construction” is costing at this time, per square meter or square foot.
Assuming the glass of something nice is not too strong, he will give you a reasonable answer, which you then multiply by the dimensions of your house to arrive at a preliminary figure. From this, deduct depreciation for every year since the house was built or extensively refurbished, at the rate of 2 percent per year for wooden buildings or 1 percent for masonry buildings, and the result – final answer! – is a reasonable value for insurance purposes.
Note: INS automatically adjusts insured values every year at policy renewal time, following an index of increases in construction costs – so if you got the value more or less OK at the beginning, it will remain so over time. But if later on you make additions or improvements, ask your insurance agent to adjust the policy to include them.
What about insuring the contents? Here are some considerations:
1. First of all, the Hogar Seguro policy does not cover theft. (Theft is covered by a separate policy, which, for various reasons, I advise you to eschew.) What about vandalism, you may ask? Coverage B is for vandalism; aren’t theft and vandalism the same? No, they’re not. A thief is someone who breaks into your house with the intention of stealing your possessions. A vandal is someone with a mental kink or an axe to grind who defaces your house with a paint bomb or sets it on fire with a Molotov cocktail.
2. I have been in wooden houses during some quite juicy tremors and, save a little creaking, absolutely nothing happened. So my advice to owners of combustible houses is not to bother with earthquake coverage; just take fire and lightning coverage A, and make certain you insure the contents of the house, because if a combustible house catches fire, the flames usually consume everything within.
3. In regard to masonry houses, your primary concern is not fire; it is earthquake. Experience in the early ’90s showed that if there is a lulu of a quake, a masonry building can suffer severe damage, but the stuff inside is mostly OK. So you should insure the house for coverage C (which you can’t get without A and D attached) but save a buck and don’t insure the contents.
4. If you decide to insure the contents, estimate their value based on current prices in Costa Rica. INS does not ask for a comprehensive list, but you should itemize single articles worth $1,500 or more.
In regard to deductibles, there is no deductible in coverage A. For coverage B, the deductible is $100 per claim; for hurricane damage, it is 20 percent. For CD coverage, the deductible is 1 percent of the total insured amount with a minimum of $100. Also, C and D have a $100 “participation” fee.
There are some exclusions: damage attributable to poor construction, lack of proper maintenance or carelessness; damage to the electrical system or contents of the house due to lightning that did not cause a fire; damage resulting from war, invasion, revolt, etc.; and minor damage such as cigarette burns on carpets, etc.
Some provisions you should take into account are not leaving the house unoccupied and unguarded for 30 days or more, and not keeping combustible materials in the house. Claims should be presented within five days of the event causing damage.
INS gives an additional free benefit called Multiasistencia on policies having coverage ABCD. For emergencies it will provide a doctor, a plumber, a mason, an electrician or a locksmith – call 800-800-8001. Curiously, it also provides free airport taxis, coming and going, up to three times a year.
If you decide you want to insure your home with an Hogar Seguro policy, measure the area under roof, get some idea of the rebuild value, then summon your insurance agent; he has to visit the home, take pictures and fill out several forms requiring your signature.
The opinions and viewpoints expressed are those of the writer. Our purpose is to give the reader a better understanding of insurance in Costa Rica. For more information, contact David Garrett at 2233-9520 or [email protected].
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