Homeowners Insurance in Costa Rica: Get It Before You Need It

Insurance is sort of like gambling, only gambling in reverse. In Las Vegas, you get a big payday if something good happens. In insurance, you get a big payday if something bad happens. But either way, you have to pay a respectable amount of cash into the system in the first place.

Take homeowners insurance in Costa Rica. If you own a home in Costa Rica, it would be extremely unwise not to insure it on some level. Fire? Flooding? Earthquake? Landslide? Robbery? It’s only far-fetched until it happens to you.

Karen Molina, an insurance agent at Grupo Arco Seguros in Liberia, pointed out a more mundane issue that she has dealt with. Many of the roofs in Costa Rica are made of red tile, and sometimes old tile can become dislodged in heavy rain and wind and fall to the ground.

So let’s say you have a friend with a new Ferrari who comes over for dinner and parks his car under your roof. But during dinner a thunderstorm blows up that causes the edge of your roof to collapse — right on top of his $300,000 sports car, crushing the roof and the hood. 

Oops! Who’s going to pay?

There’s a policy for that.

Types of homeowners insurance in Costa Rica

There are two basic types of homeowners insurance in Costa Rica: one that insures the building and one that insures the contents. And then there’s liability insurance, which we’ll get to in a bit if we don’t forget about your friend with the crushed Ferrari.

So for example, let’s say a fire destroys your home and everything in it. If the house is worth $100,000 and you’ve purchased insurance that covers the structure only, you should recover $100,000 for this loss.

But if you haven’t insured the contents of your home — furniture, appliances, electronics, artwork, jewelry, cash — all of that will go up in smoke, and you’ll have no recourse to cover those losses.

So what if you don’t own the home, you’re just renting, but you own some valuable stuff inside? Then you could buy what’s commonly known as renter’s insurance, insuring only the contents of the home. Even that Van Gogh you bought so long ago? Yes, that too.

Homeowners insurance in Costa Rica for direct property damage

Homeowners insurance in Costa Rica that covers the structure only is called “Coverage V” by Costa Rica’s National Insurance Institute (INS).

Here’s an incomplete list of what it covers: fire, smoke damage, lightning, damage caused by rioting, a car or plane crashing into your house, falling trees or towers, strong winds, floods and landslides. 

A different type of property insurance, known as “Coverage D,” covers two types of natural disasters: 

• Tremor, earthquake and fire derived thereof 
• Volcanic eruption, tidal wave, underground fire and fire derived thereof 

If you choose Coverage V but not Coverage D, you’d be covered for damage caused by an electrical fire or an ordinary wildfire, but not for a fire caused by an earthquake or volcanic eruption. It’s important to understand what you’re buying, which should be based on the risks you face.

Insuring the contents of your home

Another type of insurance, Coverage Y, insures the contents of your home. Any of the eventualities addressed by Coverage V (fire, flooding, etc.) are covered under Coverage Y, except the latter applies to the contents of the home rather than the structure alone. So you have an original 1977 “Rumours” album signed by all of Fleetwood Mac? Now’s it insured in Costa Rica. 

Coverage Y also insures the contents of your home against robbery, burglary, damage to the property caused by robbery and the cost of replacing your locks.

If you have two pit bulls, an armed watchman and a gated property, you may feel that robbery insurance is superfluous. But most people don’t have all those things, and burglary can occur anywhere. If you’re not insured for criminal mischief, you’d be out of luck if you came home from a late party to find your house cleaned out.

Molina said that if you’ve insured the contents of your home against robbery, then a reputable insurance company will reimburse you for the current replacement value of anything stolen from you. So for example, if someone managed to steal your two-door, stainless steel, 7-foot-tall refrigerator that you bought for $500 five years ago, but the same model costs $650 today, then you should be reimbursed for $650. 

What about condominiums?

If you own a stand-alone home, then it’s totally up to you to insure it at whatever level you feel is necessary. But many people buy property within a condominium complex, where the rules generally require them to contribute to a fund that insures the entire property. 

All condominium complexes have a homeowners association (HOA) that charges individual condo owners HOA fees to cover swimming pool maintenance, gardening, security and the like. And usually, these costs shared by all owners also include insurance for the physical property. So if you want to buy a condo, you’ll generally have to contribute to a fund that insures it.

This makes a lot of sense for properties where neighbors may share a common wall, or where one lives on top of the other. Suppose a three-story building has six individually owned units, and five owners have insurance but one doesn’t. If the entire building burns down, you can’t just rebuild the five insured units and leave the sixth one gutted out and burned. 

Insuring the contents of each condo, however, is up to each individual owner. You won’t be required to insure the contents of your condo, but if you don’t, you shoulder this risk alone. If you’re looking into buying a condo, be sure to ask questions about what kind of insurance the HOA fees include so that you know exactly what’s covered.

Liability insurance for homeowners

Remember your friend’s Ferrari, crushed when the edge of your roof collapsed on it? That’s where liability insurance comes in, covering bad things that happen to other people as a result of a problem that originated on your property. Homeowners liability insurance usually covers up to $100,000 in losses, so tell your friend to bring a Lamborghini next time.

But what if a slip-and-fall injury on your mossy stairs creates a medical emergency for one of your guests, requiring evacuation by helicopter to a hospital in San José? Liability insurance would cover this too. 

Known as “Coverage K,” civil liability insurance covers injury or death of third parties, or damage to a third party’s property, caused by something within the insured premises or up to 1 kilometer away (for example, a fire that started in your home burns down nearby homes).

Coverage K includes court costs related to civil liability lawsuits, as well as medical expenses and accidents caused by policyholders or their animals. It does not cover extraordinary events like war, terrorism, nuclear accidents, malicious acts, or damages “caused by the inexcusable fault of the third party.”

How to avoid bad homeowners insurance in Costa Rica

Remember that an unscrupulous insurance agent will try to separate you from as much money as possible, month after month, while creating the least possible risk for the insurance company.

For example, Molina said she has seen cases where homes are insured for twice as much as they are worth. Just FYI, if your home is worth $100,000, but a shady salesperson charges you double to insure it for $200,000, you’re only going to get $100,000 if the home is destroyed. So beware of homeowners insurance scams by bad players in this industry.

Another possibility is that your home is under-insured — for example, your home is worth $100,000, but you’re only insured for $50,000. You could lose your shirt on a deal like this. And remember, all your shirts already burned up in the fire.

The best time to buy insurance, Molina said, is at the same time you buy your house. You know exactly what the house is worth at this time — the same amount you’re handing over. Hopefully appraisers, attorneys and real estate brokers have been involved in determining the real, current value of the home at this time, and the seller and buyer agree too. You need to insure the home for this amount.

Problems can arise years later, after you’ve built two extra bedrooms, a swimming pool and a rancho — what’s the home worth now? If any of this happens, you need a professional appraiser to answer that question at the appropriate time.

How much does homeowners insurance in Costa Rica cost?

Molina said that insuring a $225,000 house, not counting its contents, might cost $544 a year. If you do the math, that’s $1.50 a day.

“What you own, it’s something that has cost you in your life,” she said. “The effort you have made, you can lose that at any moment. It’s not worth the risk to expose something that has cost you so much that you can lose it in a day.”

If you have any questions about insuring your property in Costa Rica, or you’re looking for a reputable insurance agency, contact us at specialplaces@crvr.net.