Construction insurance: how to insure your house

Construction insurance: protecting the structure and construction site

Construction insurance (also called builder’s insurance) is all-round insurance that insures the structure as well as all construction materials and components against unforeseen damages during construction. It used when building, renovating or refurbishing a house.

This damage is covered by construction insurance

With the large number of insurance policies available on the market, it is worth looking closely at the contract details, as they can vary substantially. Construction insurance generally bears the costs in the following cases:

• Natural events, such as storms, frost, hail and rain
• Damage caused by third parties (including contractors and agents)
• Damage caused by carelessness or ineptitude
• Vandalism
• Theft
• Costs of a damage assessor
• Waste disposal, salvage, earth movement, demolition and reconstruction
• Damage to completed building sections caused by mains water and storms
• Construction delays as a result of liability disputes

Restrictions: this damage is not covered by construction insurance

Damage that is not the result of natural events is generally not covered by building insurance. Among other things, this includes:

• Damage caused by weather conditions that are normal and to be expected in the relevant region and at the relevant time of year
• Problems with structural elements (liability of building company)
• Blemishes
• Fire (not compulsory in some cantons and should be reviewed in the policy)
• Construction insurance does not cover the damage if the costs are borne by liability insurance.

Cost of construction insurance

The amount of the premium for construction insurance depends on the type of construction work (above-ground, below or at ground level), the insured sum and the type of project (new construction, renovation or refurbishment). As a general rule of thumb, you can expect the insurance for a normal structure to cost around 0.2% of the insured sum.

For example, if the budget for the construction project (which is generally the same or close to the insured sum) is CHF 1 million, the premium for the construction insurance would be around CHF 2,000 (to be paid once when the insurance is concluded).

Our tip: It is customary for the cost of the construction insurance to be divided between the building owner and the construction company, as both are insured. Simply speak with the construction company prior to the start of construction to see whether and at what percentage they wish to participate in the insurance. This generally depends on the extent to which the company is involved in the overall project.

Calculating the insured sum

The insured sum that you, as the building owner, can specify corresponds to the costs that would be incurred to restore the structure if it were destroyed. Such potential costs are estimated by the insurance company before the start of construction and used to calculate the cost of the premium. After the project has been completed the actual insured sum will be defined (i.e. the actual cost of construction will be calculated) and the premium corrected accordingly. The building owner will then either receive a reimbursement or be required to make an additional payment.

Concluding construction insurance: our tips

With most construction insurance policies it is advisable to compare the details. You should also keep the following points in mind before you choose a construction insurance policy:

The insurance should include an advance payment provision. This means that the insurance immediately covers and reimburses the costs in the event of damage, even if the question of liability has not been clarified. This will help prevent major construction delays. The insurance company will clarify the question of liability afterwards and, if necessary, receive payment from the liable party.

Read the details carefully and make sure that all of the property and situations that you wish to insure are included. In addition to normal damage, some insurers also offer, for example, to bear the costs of a construction delay or the costs of lost rent.

If you are building your house together with an architect, the architect can conclude construction insurance for you as well.

If you are building in a canton where fire and natural hazard insurance are not compulsory (Valais, Geneva, Ticino, some parts of Appenzell Innerrhoden), you should cover these situations with construction insurance or building shell insurance. Building shell insurance (also known as construction period insurance) insures a structure that is being built against fire and natural hazards (including, for example, damage caused by storms, hail, landslides or lightning strikes). Construction period insurance is compulsory in those cantons that have cantonal building insurance.

Building owner’s liability insurance: protection of uninvolved people and property

While construction insurance covers damage to the building you’re constructing, building owner’s liability insurance protects you, as the building owner, if a third party is hurt or suffers damage during the course of your construction project.

A hammer falls and damages the roof of someone else’s car. Building owner’s insurance can help here, covering the costs of the damage to the car.

Building owner’s liability insurance is advisable, as it is not uncommon for uninvolved people and property to be harmed while work is being performed at the construction site. If someone is injured or property is damaged as a result of your construction project, as the building owner you’ll be liable. Whether you were directly involved or not. So it makes sense to be well covered in this area.

Our tip: The risk of private construction projects is sometimes already included in private liability insurance. It is worth reviewing this before concluding new insurance.

Learn more about the following types of insurance as well:

Building insurance
Owner’s insurance
Household insurance
Private liability insurance
Legal protection insurance
Life insurance