One of the many challenges of living in another country is finding the right insurance coverage. How do you know what coverage is best for you? How can you make sure you’ve got everything you need covered without overpaying? We sat with Frank Thomas Merten, an insurance expert who advises foreign residents in the international community for Zurich Insurance Group, and asked him what are the biggest challenges expats face when selecting insurance here in Spain.
What Is Your Background?
I was born in Germany and have lived in Barcelona for more than 20 years. I’ve always worked with Zurich, mainly in international business. I’ve lived in Germany, Spain, Switzerland and the United States. Like many expats who have chosen to live in Barcelona, I understand those challenging moments when you start a new life in a new country and you have absolutely no clue what might be different from what you would expect in your own country. I have come to know all those critical “little details” that you might miss, which can have tremendous consequences should you need to file a claim. I know how important it is to have the right type and amount of insurance, and I am happy to help expats with their insurance needs.
What Should People Know about Getting Insurance in Barcelona?
The biggest difference between Spain versus countries such as the US, Germany or Switzerland is a philosophical one regarding what and how much to insure. The typical mindset of northern Europeans is to obtain extensive coverage by seeking multiple policies for the various areas of your life. Indeed it is often said northern Europeans may “over-insure” their risks while southern Europeans may “under-insure.” These statements are difficult to quantify, but they tend to reflect cultural attitudes towards appetite for risk on various levels.
In Spain, most people generally opt for a simple solution: taking one global insurance policy which encompasses most of the coverage that you might need in your life. So it’s a different mindset than if you have a puzzle of insurance policies that get stitched together. That’s more common in northern Europe, where people often choose a specific policy for each different type of risk.
For home coverage, you can either pick a global insurance policy that covers all manner of risks. Or you may opt for bare-bones basic coverage for less money, and insure only extreme cases. Perhaps you are comfortable with certain levels of risk of damages in your home and are willing to cover the costs personally in the unlikely event that something happens, protecting only against a complete loss. For assuming these risks, you pay a lower premium.
What Are Common Types of Insurance Packages Available for Expats?
Insurance packages available to expats generally reflect the same ones common to Spanish nationals. The brokers we work with offer packages that cover home, life, health, cars, scooters, legal defense, professional indemnity, travel, pet, vessel, mobile phones, office, repatriation and many other policies.
Needs vary based on the nature as well as the geographical location of the asset. The risks of a similarly sized home in northern Spain versus one in southern Spain may be different. In the North we have snow and severely cold weather, while in the South there are lots of pools to help survive the heat, so insuring pools and vessels in the South may be more relevant to many expats living there.
What Drives the Differences in Insurance for Expats in Spain?
The difference in the insurance you choose is closely linked to your lifestyle in Spain. Do you live here year round? Or, are you splitting your time between your home country and Spain? For those who don’t live here full time, it is particularly important to carefully consider a policy that protects your property when you are not at your home.
If you are leaving your house unoccupied for weeks or months at a time, you need to manage the utilities. What if you accidentally forget to turn off the water, close the gas valve or lock the door? Whether these risks are included in your policy are important to consider.
Also critical is the option of coverage for renting out your property when you are away. Does your insurance extend to third parties? If you’re not using a property over the summer and you want to rent it out, you must have that reflected in your package; coverage to the third parties is inherently different and you need to make certain your insurance policy will have adequate coverage.
How Do Expat Risk Profiles Differ from Locals?
Somebody living in Barcelona, Madrid or Valencia who has a job here and is living with their family generally chooses insurance packages very similar to what the average Spaniard would choose. At first glance there is generally no big difference.
However, a closer look reveals that northern Europeans tend to spend significantly more money on certain items than locals do—things like high end furniture, art, etc.—so they should ensure they have appropriate coverage.
Locals, for example, normally purchase more modestly priced garden and terrace furniture because they will likely use them more frequently and then change them after a short period of time. These are some of the challenging points to check for the right coverage and costs.
Regarding vehicles, most of the coverage options are similar to those for locals. If you own a vehicle you must have insurance, so it’s important to consider carefully your options. If it’s a new vehicle you should probably select full coverage with a low deductible. But, be sure to check how much the insurance would cover on that same vehicle three to five years out. If your vehicle is older than five years it probably doesn’t make sense to have full coverage, so you may choose to consider coverage only for third parties. Should you suffer an accident and your vehicle is totally damaged, you probably won’t get reimbursed for the amount you expect.
On the other hand, if you are on a leasing contract or a loan on your vehicle, you should probably choose full coverage, because if you were to lose your vehicle due to an accident, you could find yourself in a scenario in which you are reimbursed for a fraction of what it is worth and yet still have to pay the balance of the loan.
When it comes to housing, it’s important to distinguish between owners and renters. If you own your house you would normally opt for a general contract. You will need to do your homework and create an inventory of all the property you have in the house—we always forget how much stuff we have collected. One way to define the content that you should consider insuring is to imagine it this way: if you were to turn your house upside down, everything that falls out, that’s your content!
Don’t forget to include your interesting and valuable books, stamp collections, heirlooms or whatever high value items that are hard or impossible to replace. It’s good for both the insurance company as well as for you to know what you actually have in your residence. Creating an inventory of your possessions is usually more work than you probably perceive, but it gives you a clear idea of what you should insure (or not) to avoid a scenario in which you’re underinsured.
This exercise is important whether you’re renting a flat or if you rent a flat to others. The flat owner must have insurance for the building, but usually has very little coverage for the content within. Commonly, the furniture, paintings and other contents brought into that house will not be covered by the building’s insurance policy. Therefore, it is advisable to consider whether additional insurance to cover valuable items is appropriate—and you can always obtain a policy to insure only specific, high-value items if you don’t need to insure the whole house.
All too often this is an area where we find big and unfortunate surprises, where people don’t get the coverage they expected from their or their landlord’s insurance.
What If We Don’t Have the Original Receipts for Some of the Valuable Items?
Obviously it’s always better to have receipts. But most of us don’t do a good job of keeping them, so in these cases it is even more important to develop a comprehensive list of your important possessions. If the value of your items is deemed to be higher than normal, it is advisable to have an appraiser come to your home to help determine the correct amount for insurance purposes.
I recommend you speak with a broker to help assess the value of the content in your house, since brokers have useful experience calculating the value of a household. Brokers can add significant value generating the inventory of contents to be insured, often drawing from years of experience across many clients and can think of items you may not have considered. For example, highly valued pieces of art or jewelry may need to be authenticated so that those valuables really are reflected in your insurance.
Can You Identify Some of the Common Errors That Expats Should Avoid?
One of the interesting things to consider is alarm systems. If you tell the insurance company that you have an alarm system and receive a discount on your policy for having it, then whenever you leave the house—even if it’s only for 10 minutes—you must make certain that you activate the alarm system. If you forget to put on the alarm and somebody breaks in to rob your valuables, your insurance will not cover you.
If you indicate you have anti-theft bars on the windows, those bars need to be on all of the windows; it doesn’t help if you have them on your balcony but not on your bedroom windows.
Additionally, if you state your house has been totally remodeled, this does not mean that it has merely been repainted or that the kitchen was updated. A remodeling reflects significant alterations to the premises, not cosmetic improvements. This generally means complete replacement of the electrical wiring, water system, all the pipes and even some walls. And, I must reiterate that if it’s something you’re not sure about, it is always best to ask for help with an insurance broker or agent who can accurately help you on those matters.
Most importantly, you should never lie or grossly exaggerate! If the insurance company determines that some of the information you provide is incorrect you will have a problem should a claim be necessary. So, be honest with the information you give.
Are Comparison Websites Helpful and Reliable?
For me, comparison websites can be very good because they provide a decent idea of what the price of coverage may be. Notwithstanding, the comparison sites have important limitations.
Unfortunately, it is common to find a wide range of prices, and this is because the information that drives the prices found on a website often cannot contemplate critical factors covered in the event of a claim or how the claim is processed. There are major differences in how companies service their clients as part of a claim. Will you get a replacement vehicle while yours is being repaired—and, if so, for how long? Does the insurance company unilaterally choose who performs the repairs or services needed? Are there repair shops, doctors or rental agencies conveniently located near you?
Also, the nature of how you use the underlying asset (car, flat, motorcycle, etc.) can be very important. Is the car usually in a garage or parked on a busy street? When do you use the asset—during the day or in the evening? Winter or summer?
The cheapest insurance is often not the best insurance. But you should also feel confident you are not overpaying. You might not need some of the coverage offered on a comparison website, and you may be tempted to reduce the price by removing unnecessary coverage, but that brings me back again to the value of sitting with a broker who has the insights and can advise on how to get the right coverage for your specific needs. A nuanced understanding of the best available options are only obtained by engaging a broker who can appreciate the differences in prices contextualized for your needs.
More importantly, you should invest the time to understand exactly what you buy, know everything that you may have added or removed at the click of a button, so that there are no surprises should you need to process a claim. If you buy an attractive offer with a complicated policy you will likely be unpleasantly surprised when you file a claim to find out that what you thought would be covered is not.
Should Expats Get Extra Coverage for Covid-19?
When it comes to COVID-19 there’s concern within the community as to whether or not expats need extra coverage. In Spain, anyone working and duly registered is covered by the local health system. If you fear you have contracted COVID-19 and you deem a visit to the doctor is necessary, go to your primary care physician (CAP). If you need to go into hospital, you can always go to the public hospitals and you will always be covered.
In Spain, the level of care at both private and public hospitals is very good, and additional coverage is not needed specifically for COVID-19. That said, private insurance often provides faster access to physicians, tests and more comfortable accommodations.
What Is the Difference between an Insurance Company and an Insurance Broker?
The insurance company provides the coverage, and coordinates the delivery of the services contracted, processes claims and determines the prices of its policies. It is possible to contract a policy directly with insurance companies, such as Zurich, Allianz and Mapfre.
Alternatively, you can also use a broker; brokers often represent various insurance companies and understand the differences in the respective policies, coverage limits and prices. You can think of a broker as an expert in the wide variety of insurance options available to you across multiple insurance companies.
The brokers will sit with you to understand your individual needs, goals and budget. They will explain to you how specific insurance solutions may impact you personally, they provide insight on the benefits and drawbacks among the possible alternatives and they will match you with the policies that provide the best solution for you.
Which Characteristics Should Expats Seek in an Insurance Broker?
As an expat you need someone who understands where you come from. I strongly recommend that you seek a brokerage firm with an international team that has someone who speaks your language fluently—ideally, one that is part of a global community. You should check the website homepage to see how well the company communicates in your language, or, at a minimum, ensure that the level of English is excellent in case the insurance company does not have representatives who do speak your language.
You must talk to the insurance representatives and review the policies to confirm that their whole package is written in your language, or in English. Before signing an agreement, you should have confidence that both the brokers and the call centers operate in a language understood well by all parties so that language is not a problem if a need arises to file a claim or explain a situation. Ideally, you should use brokers who understand both your culture as well as how insurance works in your native country. This way brokers can make sure that you don’t miss anything important when selecting your insurance coverage in Spain.