Fire insurance is mandatory, multi-risk is not
In a building under horizontal property (a condominium), each owner must insure their unit against fire, and the policy also covers their share of the common parts (Civil Code, article 1429). If they do not, the building administrator must take out the insurance and charge them the premium. As a landlord, this insurance is yours: it is owed by the owner, not the tenant.
For a detached house outside a condominium, the law requires no insurance. If you bought with a mortgage, the bank almost always requires fire or multi-risk insurance, with the bank named as creditor.
Multi-risk home insurance (seguro multirriscos habitação) adds a set of covers to fire. It is optional, but it is what responds to the most frequent claims in a rented property.
What multi-risk home insurance covers
Covers vary from policy to policy. The most common:
- Fire, lightning and explosion: the base, and the mandatory part in a condominium.
- Water damage: burst pipes, water heater or appliance leaks, and the resulting seepage.
- Storms and floods.
- Earthquake: almost always an optional extra.
- Breakage of glass, mirrors and sanitary ware.
- Theft or burglary, including damage to the building during the attempt.
- Owner's civil liability: damage the property causes to others, such as a shutter falling into the street.
- Assistance: emergency plumber, electrician or locksmith.
Before comparing prices, compare the general and special conditions, the excesses and the exclusions. The insurance product information document you receive before signing sums them up on one page.
Building and contents: who insures what
- The landlord insures the building: walls, roof, pipes, wiring and fixed equipment. In a furnished property, the landlord also insures the contents they own (furniture, appliances).
- The tenant insures their own belongings and their liability for damage they cause. The landlord's policy does not cover the tenant's laptop or clothes. See tenant insurance.
Tell the insurer the property is rented out
When you take out the policy, you must accurately declare every circumstance you know of that is relevant to the risk (Insurance Contract Law, Decree-Law 72/2008, article 24). During the contract, you must tell the insurer within 14 days about anything that increases the risk (article 93).
A rented property is not your permanent home: who lives there, how it is used and what is inside all change. If the policy dates from when you lived there, tell the insurer before handing over the keys. A failure to disclose can reduce the claim payment or lead to a refusal. Many insurers have dedicated products for rented homes.
If the property becomes short-term rental (alojamento local), the risk is different and there is a specific mandatory insurance: see short-term rental insurance.
Sum insured: rebuilding cost, not market value
The building's sum insured should match the cost of rebuilding it, not the price you would sell it for (which includes the land and location). For a flat, it includes your share of the common parts.
If the sum insured is lower than the value of the property, the insurer pays each loss only in the same proportion, unless agreed otherwise (proportional rule, Insurance Contract Law, article 134). A sum insured at 60% of the real value pays 60% of each claim. Switch on automatic indexation and review the amount after works.
Who pays the insurance: landlord or tenant?
The lease must state in writing who bears the property's expenses and charges (Civil Code, article 1078). Without such a clause, charges for the common parts fall on the landlord. In practice, the landlord pays the building insurance. If you want to share this cost, write it into the lease: the lease generator includes the expenses clause.
The premium for the rented property's insurance is, as a rule, an expense incurred to earn the rent and deductible from rental income (category F) for IRS. Keep the invoices and check the landlord IRS deductions guide.
A claim in the rented property: what to do
- Limit the damage: turn off the water or power if it is safe to do so. The policy requires you to do what is reasonable to avoid things getting worse.
- Ask the tenant for dated photos, and take your own on your first visit.
- Report the claim within the deadline set by the policy; if there is none, within eight days of becoming aware of it (Insurance Contract Law, article 100).
- Identify the cause: a building pipe that bursts is, as a rule, a matter for your insurance; damage caused by the tenant, such as an overflowing bath, may fall under the tenant's liability.
- Agree the repairs with the tenant. Who does what is explained in repairs and maintenance in rentals.
Multi-risk insurance does not pay unpaid rent
Multi-risk insurance protects the property. It does not pay the rent the tenant stopped paying, nor eviction costs. That is what rent insurance is for: compare the two in multi-risk vs. rent guarantee insurance.
Informational, not legal or insurance advice. Aluseg does not sell insurance. Sources: Civil Code (articles 1078 and 1429), Insurance Contract Law, Decree-Law 72/2008 (articles 24, 93, 100 and 134).