How to Insure Real Estate and Choose a Reliable Insurer

Real estate is one of the most valuable assets in a person’s life. That’s why it is especially painful when a home is damaged by natural disasters, unforeseen hazards, or malicious actions. In the best-case scenario, the damage might be limited to minor flooding or broken windows; in the worst case, it can mean the complete or partial destruction of the property.

This is where insurance becomes essential — repairs can be expensive, and payouts from an insurance company should fully or partially cover the damage, reducing the financial burden. However, choosing an insurer must be done wisely. Insurers are generally reluctant to pay out claims, and the less scrupulous ones often include ambiguous clauses in contracts.

In this article, we’ll explore what property insurance is, its advantages and disadvantages, how to choose a reliable insurer, and where insurers might try to reduce compensation.

What Is Property Insurance?

Property insurance protects owners from financial losses caused by damage to their property due to unforeseen events. In exchange for regular payments (insurance premiums), the insurer compensates for losses when a covered event occurs. You can insure:

• Structure. Walls, roof, foundation, windows, doors, and utility systems (plumbing, heating, etc.).
• Contents. Furniture, electronics, clothing, and valuables. Jewelry and antiques often require additional coverage due to limitations in standard policies.
• Liability. Damage to third parties, such as neighbors affected by a water leak.

Main types of policies:

• Named perils. It covers only specific risks listed in the policy (e.g., fire and theft).
• All-risk. Covers all risks except those explicitly excluded (e.g., wear and tear, intentional damage).
• Specialized. Covers specific events such as floods, earthquakes, or rental property coverage.
• Parametric insurance. Payouts are based on objective parameters (e.g., wind speed during a hurricane).

Pros and Cons of Property Insurance

Property insurance has both advantages and disadvantages for both parties involved. However, while insurers typically face only one downside — the obligation to pay out claims — policyholders may encounter several. Let’s start with the advantages:

• Financial protection against major losses. Insurance covers the cost of restoring or replacing property damaged by fire, flooding, theft, or other incidents.
• Peace of mind. Knowing that one’s property is protected reduces stress. This is especially important for rental properties or vacation homes, which owners cannot always inspect regularly.
• Policy flexibility. Policies can be tailored to individual needs, such as adding coverage for contents, liability, or rare risks such as earthquakes.
• Additional services. Some (though not all) insurance companies may offer supplementary support, such as temporary housing, evacuation from hazardous areas, or repairs to auxiliary buildings (e.g., garages, sheds).

Drawbacks of property insurance:

• High financial cost. Premiums can be expensive, particularly in high-risk areas such as coastal or seismically active regions. In the U.S., the average annual premium is around $2000, rising to $4000–6000 ($300–540 per month) in hurricane-prone areas.
• Coverage limitations. Standard policies often exclude major risks like floods, earthquakes, or wear and tear on the property.
• Claims processing challenges. Insurers may delay payments, demand extensive documentation, or deny claims by invoking exclusions in the contract.

How to Choose a Reliable Insurer

The primary indicator of an insurer’s reliability is its reputation. To assess it, start by reviewing customer feedback — but be cautious: overly positive reviews may suggest they are paid or manipulated. Next, check how long the insurance company has been operating. If it has been in the market for over three years, it likely has a visible public record. In such cases, any major scandals or legal disputes can usually be found online or in the media.

International insurance associations and rating agencies (such as J.D. Power) issue awards for service quality. Their platforms can be used to select a reputable international insurer.

Another crucial factor is the insurer’s financial stability. A company with sufficient reserves is less likely to delay or deny legitimate payouts. For internationally active insurers, financial health can be verified through global rating aggregators like AM Best, Standard & Poor’s, or Moody’s. A rating of A or higher generally indicates a strong ability to meet financial obligations.

As a last resort, you can turn to insurance brokers. They compare policies from various providers, factoring in your risk profile and budget. However, even in this case, due diligence is essential — always verify that the broker is properly licensed.

Practical Tips for Property Owners

The first and most important step is to assess geographic risks — determine whether your home or apartment is located in a high-risk area. For example, coastal regions are prone to hurricanes and flooding, seismically active zones have a higher likelihood of earthquakes, and urban neighborhoods may face increased risks of theft and vandalism.

Use online risk maps (available through government or insurance platforms in most countries) to evaluate potential threats. Rural houses are more often affected by wildfires or power outages, while apartments in multi-story buildings are more vulnerable to water damage or fires caused by neighbors.

Next, identify what exactly needs to be insured:

• Structural insurance (walls, roof, foundation) is mandatory for mortgaged properties and critical for high-value real estate. It is especially relevant in areas with elevated risks of natural disasters.
• Contents insurance (furniture, electronics, valuables) is recommended for tenants and owners of high-value personal belongings. This type of coverage is particularly important in neighborhoods with high crime rates.
• Liability insurance is useful for owners of rental apartments or houses, especially when there is a risk of damage caused by third parties (e.g., neighbors).

Once the policy is in place, it’s advisable to review the terms, as property values fluctuate periodically. Ideally, this should be done annually or whenever there are significant changes in structure or interior (such as renovations or market value increases).

One last but essential tip: store all documents securely. Keep the insurance contract, premium payment receipts, photos of the property and contents, and invoices for valuable items. Ideally, digital copies should be saved in a secure cloud storage system. This will protect you from the time-consuming process of document recovery and potential delays in claim processing.

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How Insurers May Avoid Payouts

Property insurance protects owners from financial losses, but insurance companies, as profit-driven businesses, aim to minimize their expenses. In 2024, 15% of property insurance claims were either denied or reduced due to non-compliance with policy terms.

Common tactics used by insurers include:

• Opaque exclusions in the contract. Policies often contain ambiguous language that excludes specific risks. For instance, a clause like “damage caused by weather conditions” may be used to deny claims related to hurricanes or floods, if those perils are not explicitly named.
• Underinsuring the property. Insurers may deliberately undervalue the insured sum at the time of policy issuance. For example, a home insured two years ago for $200,000 may have had a market value of $250,000 at the time, and could now be worth $300,000 due to price inflation. If damage occurs, the payout would still be capped at $200,000.
• Disputing the cause of damage. Insurers often demand proof that the damage resulted from a covered peril. For instance, if a roof leaks, they may claim it was caused by “roof deterioration” rather than heavy rain, and deny the claim on those grounds.
• Delaying claim processing. Insurers may request extensive documentation or conduct prolonged assessments — often lasting 2–3 months — to delay payment. In some cases, they offer a quick payout at just 30% of the claim amount as a “take-it-or-leave-it” alternative.

To avoid these tactics, it’s essential to clearly define insured events using specific, unambiguous language. If there’s a risk of flooding, it should be listed as a separate and explicitly covered peril — vague wording can be interpreted in different ways, and insurers tend to interpret it in their own favor, especially in legal proceedings.

Before signing an insurance contract, it’s advisable to consult with an independent appraiser. This ensures the most accurate and current valuation of your property, which should serve as the basis for the coverage amount. Insurers benefit when the coverage limit is set too low — it means higher monthly premiums for you, but significantly lower payouts for them if a claim arises.

The same applies to damage assessment. The insurer will send its own adjuster, whose job is often to look for reasons to deny or minimize the claim. It’s in your best interest to hire an independent expert to evaluate the extent and cause of the damage.

If you experience pressure or coercion from the insurer, make sure to document it and report the incident to law enforcement and your country’s insurance regulatory authority.

Final Thoughts

Property insurance is a balance between financial protection and inevitable costs. On one hand, insurance companies receive steady income from premiums, while property owners gain peace of mind knowing they will be compensated in the event of unforeseen incidents such as fire, flooding, or theft.

On the other hand, policyholders must make regular premium payments, and insurers incur costs when claims arise, which can sometimes lead to attempts to reduce compensation.

Ultimately, the decision to purchase insurance lies with the property owner. It depends on their willingness to bear ongoing costs, their risk assessment, and their desire to protect a valuable asset. The key is to approach the choice of insurer intelligently, carefully reviewing contract terms and evaluating the company’s reputation.