What buildings insurance your bank requires, and how not to overpay for it

Your bank will require property insurance (pojištění nemovitosti) for as long as the mortgage runs, with the payout assigned to the bank (vinkulace). The requirement comes from your contract with the bank, not from the law. What must be insured is the building (a house, or a flat as a unit), not the contents, which are of no interest to the bank. Annual premiums for ordinary flats and houses range between CZK 2,000 and 8,000.

People tend to get two things wrong. They insure the property for the loan amount or the purchase price instead of the cost of rebuilding it, and they take the bank's policy for the rate discount without working out what they pay for it. Both are worked through with numbers below. On a CZK 4 million mortgage over 25 years at 5.00 % (payment CZK 23,384), a 0.1 pp rate discount is worth roughly CZK 2,800 a year.

Is property insurance compulsory with a Czech mortgage?

Yes, though the duty comes from the loan agreement, not from the law: every bank wants the building insured for the whole repayment period, with the payout assigned to it. Contents cover is your own choice, and cover for your payments is a different product altogether, which the bank only rewards with a rate discount.

The policy must cover at least the basic natural perils: fire, explosion, lightning, windstorm, hail, snow load, escape of water from pipes, and flood or inundation where available. Insurers will not cover flooding in the highest-risk flood zone, and the bank may then refuse to finance the property or lower the LTV. Check the zone before you sign the reservation agreement, not at drawdown.

What sum should you insure the property for?

The sum insured (pojistná částka) should match the reinstatement value of the building, meaning what it would cost to put up the same structure again. It is not the purchase price, which includes land and location that cannot burn down, and it is not the mortgage amount, which has nothing to do with the building's value.

• A house: a purchase price of CZK 9 million may break down into a plot worth CZK 3 million and a building that would cost CZK 6 million to rebuild, so the sum insured is CZK 6 million. The bank's valuation (odhad) gives an indicative reinstatement value alongside the usual market price.
• A flat: you insure the unit itself, meaning floors, partition walls, windows, the fitted kitchen, sanitary fittings and the installations inside the flat. The common parts of the building (roof, facade, lift) are insured by the owners' association (SVJ).
• Indexation: agree automatic increases of the sum insured in line with construction costs. A 2019 policy without indexation is almost certainly underinsured in 2026.

Underinsurance is punished hard under § 2854 of the Civil Code. The insurer cuts the payout in the same proportion as the sum insured bears to the insured value, on every claim, not just a total loss.

How does assignment to the bank (vinkulace) work?

Assignment means the insurer pays any claim to the bank rather than to you, so the bank knows its collateral cannot lose value without compensation. In practice:

1. Once you have a policy, ask the insurer to assign it on the bank's form. The insurer confirms the assignment, usually free or for an administrative fee, and you give the confirmation to the bank before drawdown.
2. For smaller damage the bank usually lets the payout go straight to you; each bank has its own internal threshold for this. For large damage it wants proof that the money is going on repairs, or it uses the money to pay down the loan.
3. When the mortgage is repaid, the bank cancels the assignment along with its consent to deletion of the lien. Ask for the cancellation yourself, because not every bank does it automatically.
4. When you switch insurer, the new policy has to be assigned and the bank must have the confirmation before the old one ends. A gap in cover is a breach of the loan agreement.

The bank's policy or your own? Count the whole fixed-rate period

The bank offers insurance as soon as you apply and gives a rate discount, in the order of tenths of a percentage point, for taking it (often together with payment protection insurance and an active current account). In October 2026 bank offers range between 4.7 and 5.8 %, depending largely on how many of these conditions you meet.

Do the maths for the whole fixed-rate period. On a CZK 4 million mortgage over 25 years the payment is CZK 23,384 at 5.00 % and CZK 23,151 at 4.90 %, so a 0.1 pp discount is worth CZK 233 a month, CZK 2,796 a year. A 0.2 pp discount (payment CZK 22,920) is worth CZK 464 a month, about CZK 5,570 a year.

If the bank's policy costs CZK 2,000 a year more than a comparable one of your own and the discount is 0.1 pp, the bank's package still comes out just under CZK 800 a year ahead. Once the premium difference exceeds the value of the discount, or the bank also ties the discount to life insurance costing several hundred koruna a month, the sums go the other way. Check the effect on your own mortgage with the comparison of two mortgages.

Why the SVJ's policy is usually not enough for a flat

The owners' association (SVJ, společenství vlastníků jednotek) insures the building as a whole: the common parts and usually the structural parts of the units too. Even so, the bank usually wants separate insurance of your flat with an assignment, because one owner's share of the SVJ policy cannot be assigned, and after damage the payout goes to the SVJ's account, not into repairing your flat. A few banks accept the SVJ policy if the association confirms the scope of cover and the sum insured, so ask in advance.

Before you buy, ask the SVJ committee for the building's policy and check the sum insured. Buildings insured years ago for a low sum are underinsured as a whole, and after a larger claim the shortfall comes back to the owners as an extraordinary contribution to the repair fund (fond oprav). Insuring your own unit will not fix that, but at least the inside of your flat is covered in full.

Before you sign a policy

• Sum insured equal to the reinstatement value of the building (not the flat's price, not the loan amount), with indexation agreed.
• Flood and inundation included where the zone allows; for a house, also snow load and falling trees.
• Escape of water from pipes, including damage to the installations, which is the most common claim in flats.
• Excess: a lower excess raises the premium, and a few thousand koruna is a sensible compromise.
• Exclusions: a property left empty for longer than a set period, short-term letting, a building under construction. A house being built needs special construction insurance, which the bank requires from the first drawdown of a mortgage to build.
• Owner's liability (for flooding the neighbours), usually a few hundred koruna extra.
• Assignment confirmed and handed to the bank before the first drawdown.
• The premium due date in your calendar. An unpaid premium means the cover lapses and the loan agreement is breached.

The annual premium of CZK 2,000–8,000 depends on the sum insured, the type of building (a flat is cheaper than a house), the location (flood zone), the risks covered and the excess. The policy must be in force before the first drawdown, so arrange it when you sign the loan agreement. Premiums can be paid annually, half-yearly or monthly, and paying annually tends to be cheapest. In your budget that is CZK 170–670 a month, roughly 1–3 % of the payment: the cheapest part of a mortgage, and not the place to skimp on the sum insured. Budget for it alongside the valuation (CZK 3,000–6,000) and the fee for registering the lien in the land registry (CZK 2,000).