AZE.US
Azerbaijan may revise the way mandatory real estate insurance is calculated, shifting toward a more differentiated model that takes account of the actual characteristics of each property.
Under the proposed approach, insurance amounts could be linked to a property’s location, size, market value and risk exposure. That would mean an apartment in a high-value district of Baku and a house in a remote village would no longer be treated in the same way when potential damage is assessed.
Experts say the current system is too simple to reflect the real value of property or the risks attached to different locations.
At present, mandatory real estate insurance is based on fixed annual payments: 50 manats for apartments in Baku, 40 manats in other major cities and 30 manats in the regions. The model is easy to understand, but it does not fully account for the market value of a home, its size or the cost of possible damage.
The main change would concern how compensation is calculated after an insured event. Under the new logic, payouts could depend on where the property is located, how much it is worth and what kind of risks it faces.
For example, damage to an apartment in an expensive part of Baku may cost much more to repair than damage to a small house in a rural area. A uniform system can blur that difference, even though the actual cost of restoration may vary sharply.
The new concept also covers risks such as fire, explosion and lightning. Insurance companies may also offer voluntary packages for specific risks or higher-value properties, allowing homeowners to choose broader protection beyond the mandatory minimum.
According to the information currently available, higher payouts would not necessarily mean an increase in insurance fees. The mandatory insurance system is expected to remain as a basic and affordable option, especially for citizens who cannot pay for more expensive insurance products.
That balance will be important. Owners of high-value property may want coverage that better reflects the real cost of their homes, while lower-income families should not face a sudden new financial burden.
Some residents support the idea of linking insurance more closely to the value of the property. Their argument is simple: a home worth 50,000 manats and a property worth 1 million manats should not be treated as equal when possible damage is calculated.
If introduced, the new system could make Azerbaijan’s real estate insurance market more flexible and more accurate. But much will depend on the details: who will determine market value, how risk will be assessed, which events will be covered under the basic package and how much additional voluntary coverage will cost.
For now, the main purpose of the proposed changes appears to be a move away from a one-size-fits-all system. For Baku, where property prices can differ sharply from one district to another, that shift may become especially important.
AZE.US