Investment approach
Insuring an investment property: what's compulsory, what's sensible
The law requires you to insure almost nothing, but the bank, the owners' association and the renovation itself each come with insurance requirements of their own.
Spanish law does not oblige an owner to insure the flat itself. But if you buy with a mortgage, the bank will require insurance. And during a renovation the risks go up, while the community's building policy usually does not cover the owner's liability to the neighbours.
What the law requires
Spanish law does not make it compulsory for a flat owner to insure the flat itself. The building as a whole is usually insured by the comunidad de propietarios (owners' association): its policy covers the structure and the common areas, and the premium is included in the monthly community fees. The contents of the flat and the owner's liability to the neighbours are generally not covered by that policy.
What the bank requires
If the property is bought with a mortgage, the bank will require buildings insurance (seguro de daños) for at least the reinstatement cost. The law does not oblige you to take the policy out with the bank itself: the borrower is free to choose the insurer, as long as the policy meets the lender's requirements.
Renovation is a separate risk
Renovation work brings more risk than usual: leaks into the flat below, damage to the common areas, accidents on site. The contractor must have its own third-party liability insurance, and it is best to get a copy of the policy before work starts. The owner should also check whether their own policy still applies while the property is empty and being renovated: standard home insurance policies sometimes limit cover for unoccupied properties.
Insurance in the holding budget
Insurance is a small but recurring holding cost. How to budget for it alongside the other running costs is covered in our article on the costs of holding a vacant property.
Questions and answers
If a leak during the renovation damages the neighbours' flat below, who pays?
If the contractor's work caused it, the contractor's third-party liability insurance pays first. If the cause is the condition of the flat itself, liability may fall on the owner and their policy.
Does the owners' association policy cover my flat?
It usually covers the structure of the building and the common areas. It does not cover finishes, furniture or appliances inside the flat, nor the owner's personal liability. The exact cover depends on the wording of the specific policy.