If you are buying a condominium flat with a loan, towards the end of the bank paperwork you will come across the request: “please provide property insurance for the collateral property and the clause”. At this point many people are surprised that, although the building has insurance, they are asked for separate home insurance – while others pay for two policies for years without knowing what covers what. As a broker, I see that the misunderstanding almost invariably stems from the same source: the building's policy and home insurance are two different contracts with two different policyholders, and the bank wants to see one very specific thing. This article shows what the bank expects, what the building's common policy is suitable for, and where a separate solution is needed.
- For the flat serving as collateral, the bank may require property insurance and ask to be named on the policy as mortgagee – by means of a loan-security clause; the Consumer Credit Act expressly allows this.
- The condominium's policy covers the structural, commonly owned parts of the flat in proportion to the ownership share; whether the bank accepts it behind the loan varies from bank to bank – many require separate home insurance with buildings cover.
- Double cover is not necessarily wasteful: the building's policy and your own home insurance protect different things – the key is not to pay twice for the same structure without good reason, and for the bank's requirement to be met on paper as well.
What does the bank expect for the collateral property?
Section 14/A of Act CLXII of 2009 on consumer credit (Fhtv., the Consumer Credit Act) prohibits tying, but as an exception it states that for a mortgage loan the lender may require the consumer to hold property insurance on the property serving as collateral. The same section also provides that the bank must accept insurance from a provider other than the one in its own offer if it is at least equivalent in terms of the sum insured and the scope of cover – so the choice of insurer is yours, while the content of the requirement is the bank's.
Based on banks' public information, the requirement typically has three elements: at least fire and natural-peril cover; a sum insured that reaches the loan amount or the collateral value set by the bank (which of the two varies from bank to bank); and the bank being named on the policy as mortgagee – in practice this is called the loan-security clause (mortgagee clause). The point of the clause is that for a larger loss the insurer pays with the bank's knowledge, typically with the bank's consent, and the insurer notifies the bank if the contract terminates – for example because of non-payment of the premium. The exact content of the clause varies by insurer and by bank, so it is worth asking the bank for its written requirement word for word.
What does the building's policy cover – and what not?
The policyholder of the condominium policy is the condominium itself, and under Hungarian policy conditions the insured persons are typically the condominium and the co-owners in proportion to their ownership shares. The cover is built on the commonly owned parts of the building: roof, façade, floor slabs, stairwell, risers – that is, also the “shell” of your flat, to the extent that it is common property under the deed of foundation. What is common and what is separate property within a flat varies from building to building; the article on the boundary between common and separate property gives an overview.
What the building's policy typically does not cover: some of the separately owned elements inside the flat, the contents of the flat from built-in furniture to household appliances, and your personal liability as a flat owner (for example if water from your flat leaks into the flat below). The relationship between the two contracts is discussed in detail in the article on how home insurance and condominium insurance relate. From the bank's point of view, the key point is this: the building's policy “reaches” the structure of the flat only in proportion to the ownership share and only up to the building's sum insured – if the building is underinsured, the part attributable to the flat is also less than what the bank expects behind the loan.
Will the bank accept the condominium's insurance?
There is no single answer to this, because banks' internal rules differ. As a broker, I see three kinds of practice. Some banks accept the building's policy if the insurer certifies the cover, the sum insured attributable to the flat reaches the required level, and the insurer registers the bank as mortgagee on the flat – the separate unit (albetét). Some banks take the building's policy into account only as a supplement and require separate home insurance with buildings cover in your name behind the loan. And some accept only separate home insurance from the outset, because they cannot handle the clause on a shared policy with many parties.
If the bank accepts the building's policy, one practical obstacle lies on the building's side: adding the clause is an amendment to the contract, which only the policyholder – the condominium, acting through the common representative (the building's elected manager) – can request from the insurer. This requires the representative's cooperation, and the building should also know what it is taking on: for a loss affecting a unit with a clause, the bank's statement may also be needed before payment. It is worth agreeing this with the representative in advance, in writing, and recording in the building's insurance file which bank's clause has been added for which flats.
Double cover: waste or common sense?
If the bank requires separate home insurance, your own policy and the building's policy partly overlap on the structure of the flat. This does not mean double compensation: under the rule of the Hungarian Civil Code (Ptk.) on multiple insurance (Section 6:459), the same interest may be covered by several insurers, but the loss is not paid twice – the insurers share it between themselves. That does not make your own home insurance superfluous: contents, the separately owned parts inside the flat and liability cover are not the job of the building's policy in the first place, and the simplest way to meet the bank's requirement is with a policy in your own name.
What to watch out for: size the buildings part of your own policy not to the value of the whole building, but to the actual rebuilding value of the flat and to the bank's requirement; and for the building's policy, ask the representative whether the sum insured is up to date. Underinsurance on the building's policy also reduces the part attributable to your flat proportionally – the rule is explained in the article on underinsurance.
What should you do if you are taking out a loan now?
- Ask the bank for its exact requirement in writing: what cover, what sum insured, and in what form it wants the clause.
- Ask the representative for the basic details of the building's policy: insurer, policy number, sum insured, renewal date – these are the building's documents, and as a co-owner you may inspect them.
- If the bank accepts the building's policy, request the clause through the representative; if not, take out separate home insurance with buildings cover and have the bank's clause added to it.
- Keep an eye on the continuity of premium payments: the bank is notified if a policy carrying its clause terminates, and under the loan agreement this may have consequences.
Meeting the bank's requirement remains your task, but if you let me know before the loan process, I am happy to prepare the comparison and the paperwork – showing which solution meets the bank's request without you paying twice for the structure of the flat.
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Sources
- Consumer Credit Act (Fhtv.) Section 14/A (Act CLXII of 2009 on consumer credit) – National Legislation Database (Nemzeti Jogszabálytár)
- Hungarian Civil Code (Ptk., Act V of 2013) – National Legislation Database (Nemzeti Jogszabálytár)
- Colonnade ATLASZ Társasház Biztosítás (condominium insurance) – policy conditions and customer information (2023)
- OTP Bank knowledge base – Insurance questions for property loans (bank requirements, mortgagee clauses)
- coverme.hu – Home insurance for a mortgage: bank requirements (2026)
- MNB (Hungarian central bank / supervisor) Pénzügyi Navigátor (Financial Navigator) – Home insurance
