Guide to change of ownership insurance

What exactly does the change of ownership insurance cover and what should you, as buyer, be especially aware of?

Briefly, the change of ownership insurance covers any hidden defects or shortcomings in the property, that are not listed in the condition report (tilstandsrapport) or the electrical installation condition report (elinstallationsrapport), and which you were not yourself aware of at the time of handover.

As buyer, it is important, however, that you scrutinize the insurance terms carefully, as there can be big differences in coverage, premiums, reservations, deductibles, etc.

Minkøbermægler.dk has listed some of the points to be aware of below.

1. Note that it’s voluntary for a buyer to take out a change of ownership insurance, as opposed to a home insurance, which is obligatory. Change of ownership insurance covers any damages that may arise prior to the handover and after the handover, while the home insurance only covers damages that arise after the handover date. After submitting a purchase offer, you will receive a change of ownership insurance offer from the seller, typically from Dansk Boligforsikring. As a buyer, it’s recommended that you also find some alternative insurance offers. However, the seller is only obliged to pay an amount corresponding to half of the change of ownership insurance premium on the (cheapest) specific offer that the seller has presented to the buyer and that meets the minimum requirement laid down by law.
2. As a buyer, you can choose a change of ownership insurance policy that has a duration of either five years or 10 years. The seller’s change of ownership insurance offer has a duration of five years and therefore meets the legal minimum requirements. The 10-year change of ownership insurance is better known as extended change of ownership insurance and typically covers conditions such as contaminated soil, illegal building devices, illegal sewer lines, etc.
3. To take out a change of ownership insurance, there must be a valid condition report and a valid electrical installation condition report. You should take note of how long these reports are valid for. This will be stated on page 1 of the condition report and the electrical installation condition report.
4. You can’t take out a change of ownership insurance on all types of property; for example, housing co-op units (andelsboliger) agricultural properties (unless the sale is conditional upon the removal/termination of the agricultural-use obligation). Condominiums / apartments are covered by the law, but the mandatory building inspection scheme and the rules on change of ownership insurance can only be used for small owners’ associations; for example, two apartments. If the sale concerns a mixed-use property (residential/commercial), the scheme can only be used if the property has been used primarily as the seller’s residence or is principally intended as residence for the buyer. The reasoning here is that if more square feet are given to commercial use than residential, then the insurance companies will not offer change of ownership insurance.
5. If you, the buyer, are living in the property at the time of purchase, it may be difficult to find an insurance company willing to offer you change of ownership insurance. In this case, you should see if you can find an insurance company that will accept that you, the buyer, will not report any conditions that you become familiar with before you become owner of the property, and that this is verified with a sworn statement.
6. When you receive the change of ownership insurance offers, it’s important to see whether there are any reservations in the insurance coverage. If you are in doubt as to the scope of the insurance coverage, it’s always a good idea to ask your buyer’s agent or the insurer.
7. In the event of damages, the buyer must contact the insurance company, which will then assess whether the damage is covered by the insurance. Note that the insurance does not cover circumstances that can be regarded as normal, taking into consideration the age of the property.
8. The extent to which damage is covered by the change of ownership insurance policy will always rest on a specific, individual assessment on the part of the insurance company. If, as a buyer, you disagree with the insurance company’s decision, you can bring the case to the Board of Appeal for Insurance (Ankenævnet for forsikring). This is an independent body that will assess your case. The Board of Appeal for Insurance also has statistics on it’s website where you can read more about lost/won change of ownership insurance cases for the various insurance companies.
9. Companies that offer change of ownership insurance policies are: 1. Gjensidige, 2. Topdanmark, 3. Alm. Brand. Your buyer agent may advise you on the different offers that you receive, but the buyer agent is not permitted to recommend a specific company. Before you choose an insurance offer, it’s always a good idea to check out reviews of the insurance company and check the outcome of any appeal decisions made by the Board of Appeal for Insurance.
10. Note that if the change of ownership insurance and home insurance are taken out with two different insurance companies, the buyer can be used as a ‘pawn’ and thus be caught between the insurance companies. On the other hand, it may turn out to be an advantage to have home insurance and change of ownership insurance with separate companies, as there is a greater likelihood that it will also be investigated whether the damage to the house is due to circumstances that should be covered by another insurance. Of course, the home insurance company does not want to cover the same damage multiple times, and therefore they prefer the change of ownership insurance company to step in to remedy the cause of the damage. In the end, it is about exploring the market for which insurances best suit your needs, and where you can get the best coverage. This applies to both home and change of ownership insurance.
11. If there is a rejection of change of ownership insurance, it is important to distinguish whether it is a general rejection of change of ownership insurance or a specific rejection based on the physical condition of the property. If it is a specific rejection due to the physical condition of the property, the seller can use the home inspection scheme and thus be exempt from their 10-year defect liability. Conversely, if it is a general rejection because the insurance company does not insure the type of property, the seller cannot fulfill the conditions of the home inspection scheme and therefore cannot be exempt from their 10-year defect liability. A general rejection may, for example, be that the insurance company does not insure the specific type of property, such as properties worthy of preservation, properties where the seller is a selling company, or newly built properties.
12. If you wish to take out a change of ownership insurance, then you must do so within the time limit stated in the insurance offer and, in any case, before the handover of the property. It’s the buyer’s responsibility to ensure that the insurance has been taken out in a timely fashion.