Although it may not sound familiar to you, first risk is a modality that is applied in damage insurance, we can find it in home, commercial or community insurance for coverage of aesthetic damage, unblocking, theft of cash, robbery, search and repair of breakdowns in pipes, you can identify it because the economic amount involved is always indicated (it is a capital sum).
What is first-loss insurance and how does it work?
In other words, imagine that you have a home insurance policy with a first risk in theft of 10,000 euros and unfortunately your home is robbed and everything is taken, the company would compensate you with 10,000 euros, even though the contents of your home are worth 20,000 euros.
Why is the first risk (firt loss) used? Advantages and disadvantages.
It is often included in property insurance policies to lower the insurance premium, as the first risk is cheaper than full value insurance, although there is a risk that the first risk value is lower than the actual value at the customer’s expense.
It is used in guarantees or coverages that are difficult to assess, so that the client can know what capital is available in the event of a claim and as a measure to avoid underinsurance/overinsurance in certain coverages or capitals, for example, in the case of unblocking, when reading the policy you know what budget you have for it, and it is clear that once you exceed the amount you will have to pay the costs.
Is it advisable to take out first-risk insurance?
In futurseguros, as your insurance agent in Mallorca, we do not have a valid answer for all cases, this depends on each case, whether we are talking about home insurance for your home, your business, or the use you give to the property, the important thing is to know how it affects you and from there you decide whether it suits you or not, that said…
Although it will depend on each situation and it is best to analyse each case, in general, we do not recommend it for basic guarantees, such as building or contents, as the value is usually lower than the real value, however, we do recommend it for optional guarantees such as cash theft, unblocking, etc.
Although in any case it will depend on the first risk capital that is contracted and the value of the goods or services, ask us here without obligation, as an insurance professional we will be able to advise you.