Insuring purchased or rented property

What is the compulsory insurance cover?

Responsibilities of the owner and of the tenant

When one buys a property, what insurance cover should one take out? From the moment when the property is leased, what are the responsibilities of the owner? The tenant will be held responsible for damage they may cause to the building during the lease. However, the law does not require the tenant to be insured. All the details, with Jean-Luc DAVID-HENRIET, Product Manager with AXA Assurances Luxembourg.

1/ When one becomes an owner of property, what insurance cover should one take out?

When buying a property it is very much in the owner’s best interests to insure this acquisition in order to preserve the asset in case of a devastating event (such as fire, or storm). If a mortgage loan has been taken out, the bank will require the owner to take out a residential insurance contract to cover the building (whether a single family home, or an apartment in a building where no insurance has been taken out by the syndic on behalf of the co-owners), or will require a copy of the insurance contract covering the residence that has been taken out on behalf of the co-owners. (The nature of the insurance recommended to cover the building is described at point 8)

Once they have moved into their property (whether it is an apartment or a house), it is also very much in the owner’s best interest to cover the contents (for example: furniture, clothes, jewellery, sports/leisure equipment, works of art, curios, books, CDs/LPs, telephones, computers, etc.). The insurance recommended in order to properly cove this type of contents is as follows: fire, storm, water damage, multimedia equipment, theft, electrical damage, earthquake and sewerage back-up.

2/ From the moment when the property is rented, what are the compulsory types of insurance to be taken out by the owner/lessor?

In respect of the owner/lessor’s civil liability, the law does not require any insurance in Luxembourg (see below in the response to point 6).

3/ If the owner does not live in the premises, or if their tenant is absent, who is responsible for a loss in an unoccupied property?

From the moment when a lease contract has been signed and the property has suffered a loss, while the lease is still valid, it is the tenant (whether or not they are absent) that is presumed to be liable for the loss following a fire, or water damage. In order to be released from this responsibility, they would have to prove that the cause of the loss cannot implicate their liability as a tenant by demonstrating that the origin of the loss was not located within the accommodation they occupied, or that the cause of the loss is the civil responsibility of the owner (for example: a fire due to the dilapidated nature of the electrical installation, or a third party injured by a falling tile due to the roof being in a poor state of repair).

The tenant’s responsibility is also not implicated in the event of an incidence of force majeure, or where the loss arises due to natural phenomena (storm, flood, etc.).

4/ Who is responsible in the case of a loss at an unoccupied property?

If the unoccupied property is the origin of the loss, this may be the responsibility of the owner of the property. Otherwise, the owner is released from any responsibility.

5/ Is there an insurance policy for a non-occupant owner? If so, why should one take out such a policy?

Yes. Non-Occupant Owner Insurance (PNO) may cover the owner’s liability in respect of their tenant, in their capacity as lessor (by virtue of Article 1721 paragraph two, of the Code civil); it may also cover the costs that the non-occupant owner may incur, by virtue of Articles 1382 to 1386 of the Code civil for material damage caused by a loss that spreads to affect property owned by third parties.

6/ What insurance is the tenant of a property required to have?

In respect of tenancy related Civil Liability, the law does not require any insurance in Luxembourg. The sole legal obligation for the tenant is to compensate for any damage for which they are responsible in respect of the tenancy related civil liability (fire, water damage), but they are not required to take out tenancy related civil liability insurance. The fact remains however, that virtually 100% of tenants do take out such an insurance (the lessor often requires the tenant to provide an attestation of insurance).

7/ What kind of leases are excluded from the requirement to have insurance?

Sometimes the lessor may stipulate in the lease contract that they renounce their entitlement to claim against their tenant in the case of deterioration/destruction of the leased property due to fire or water damage. The lessor must then inform their insurer so that this renunciation of entitlement to claim is managed by the insurer.

8/ If the property is held in co-ownership, what should the co-owner/lessor look out for: what insurance should be taken out in respect of the collective insurance of the building, or additional insurance?

In order to be properly insured, the co-owned property must be covered by insurance against the following risks: fire, storm/hail, deterioration to the property arising from theft (for example: broken front door), vandalism (e.g.: tags), water damage (in particular ensure that the cover limit for “openings/latch fastening locks in walls and ceilings” is set quite high, and for at least 50,000 EUR), broken windows, damage to electrical appliances that are an integral part of the building (for example: garage door motors), building civil liability insurance, earthquake and sewerage back-up.

9/ For furnished accommodation, what should one do?

The tenant must insure for their tenancy-based civil liability, as for an unfurnished rental. Insurance of the existing furniture (contents belonging to the owner) can be taken out by the tenant on behalf of the owner (a specific application must be made to their insurer).

Emilie Di VINCENZO