Definition of a House Under Construction According to the General Terms and Conditions (GTC)
In both this and the following sections of the article, I will refer to the General Terms and Conditions of Allianz's "My Home" insurance policy. Although conditions are usually very similar between different companies, it is always worth thoroughly examining all definitions, exclusions, and the scope of coverage.
A house under construction or an apartment under construction is a property that meets one of the following criteria:
- The start of construction work, confirmed by the first entry of work in the construction log.
- Ongoing work related to expansion, superstructure, reconstruction, or renovation.
- The insurer will not pay compensation for damages resulting from conditions defined in the Building Law.
- The construction or renovation process is considered complete when the house or apartment is inhabited, provided that the required technical inspections have been carried out, or when the property has received an occupancy permit. It's worth noting that there is no restriction on the type of house being built - it can be a single-family house, a multi-family house, etc.
What is Home Under Construction Insurance?
Home under construction insurance is a special type of policy that provides financial protection against damages or losses incurred during the construction or renovation of a house. This is an essential safeguard considering that building a house involves many risks, such as structural damage, theft of building materials, or even accidents on the construction site. This policy can cover a wide range of events, including fire, flood, or acts of vandalism. This insurance is crucial support for the owner of the building, allowing coverage of potential financial losses and providing peace of mind throughout the construction process.
What Does Home Under Construction Insurance Cover?
Home under construction insurance can cover various risks that are crucial for securing your investment during construction. Here are some of them:
- Structural damages - covers damages resulting from improper work, design errors, or weather conditions. This includes permanent elements of your house.
- Theft of building materials - provides protection against theft of raw materials and supplies from the construction site. This also applies to theft with burglary in later stages of construction (e.g., at the closed shell stage, though it is always worth checking the policy terms before purchasing insurance). Burglary may include destroyed windows and doors.
- Accidents on the construction site - covers costs related to accidents affecting workers or damages caused by construction equipment.
- Acts of vandalism - protection against intentional destruction or damage to property.
- Natural disasters - covers damages caused by random events, including floods, hurricanes, earthquakes, or fires.
- Personal liability - protects against claims from third parties related to damages or accidents occurring during construction work.
The policy can be tailored to the specific needs and requirements of the construction, with options for additional coverage, such as insurance for construction equipment or coverage for additional costs related to construction delays.
How to Insure a House During Construction?
Insuring a house or apartment is very easy, whether it is under construction or not. Everything usually happens within a single product, as in the case of Allianz My Home. To insure, you need:
- Your details (and those of other persons if, for example, you are purchasing liability insurance).
- Address of the house or apartment, square footage, floor (in the case of an apartment), year of construction, and for a house under construction, information about the current stage of construction.
- Information about the value of the house and all insured movable and immovable property.
That's it! Based on this information, you will find out what the offer is, the premium, and receive all the necessary information, then you can proceed with the contract. You can purchase insurance without leaving home thanks to remote service.
Is This Insurance Mandatory?
Property insurance is not mandatory under Polish law, but it is highly recommended. The lack of such a policy does not entail legal consequences; however, by choosing to purchase it, the owner of the construction gains significant financial protection. Home and apartment insurance covers potential losses and damages that may occur during construction – from theft of materials to damages caused by unforeseen accidents. Given the high costs and risks associated with the construction process, this policy offers crucial protection that can safeguard your home or apartment from unexpected events.
When Will the Insurer Pay Compensation and What Are the Exclusions?
Policies for homes under construction and beyond are usually backed by fairly extensive insurance terms. This is typically not an individual policy but simply selecting the scope of coverage in the insurance contract. Let's cite a few general provisions from the Allianz My Home GTC to better illustrate the coverage and possible exclusions.
What Does the Insurance Cover?
The insurer will pay compensation if there is damage or loss to the insured items. Insured items can be various things that meet the following criteria:
- Ownership of the Insured - includes items owned by the insured person.
- Possession based on cooperative law - items that the insured possesses based on cooperative rights to a property.
- Possession based on a civil law contract - items that the insured possesses under a civil law contract or other legal title.
Items that can be insured include:
- Houses and apartments, including those under construction.
- Summer houses and utility rooms (including those under construction) located in the same building as the insured apartment.
- Utility buildings (also those under construction) located in the same locality as the insured house or apartment.
- Plot elements, household movable property, valuable items, glass items, and property on the terrace and in the garden.
- Building materials located on the premises of the house under construction or in the apartment under construction, provided they are not used for business activities.
- Permanent finishing elements of the building or premises are also covered by insurance. If the insurance covers an apartment in a building with up to four apartments, the policy may also include the insured's share in the common parts of the building.
- Additionally, it is possible to insure a house, apartment, or utility building in which business activities are conducted, provided that these activities do not occupy more than 50% of the total area and if such information is reported to the insurer before the contract is concluded and confirmed in the policy.
Of course, this is not the full scope, as this insurance can be expanded with additional contracts, such as liability insurance, home furnishings, and much more.
What About Liability Exclusions?
Like the coverage, exclusions are usually specified for each individual contract and can be found in the general terms and conditions. Let's look at the chapter that specifies general exclusions.
The insurer will not pay compensation for damages resulting from:
- Intentional actions by the insured - damages caused intentionally by the insured person.
- Gross negligence of the insured - although such damages are generally excluded from coverage, exceptions include damages caused by fire due to negligence (e.g., leaving the iron on). In such cases, the insurer may cover the losses.
- State of intoxication or under the influence of drugs - actions of the insured while under the influence of alcohol, drugs, or other psychoactive substances.
- Conducting business activities on the insured premises - unless these activities do not exceed 50% of the area and have been reported and approved by the insurer.
- Armed conflicts, terrorist actions, state repression, confiscation - all damages resulting from warfare, terrorism, state repression, and administrative decisions such as confiscation or nationalization.
- Nuclear energy or ionizing radiation - damages caused by nuclear accidents or radiation.
- Mining damages - according to Geological and Mining Law.
- Vibrations, noise, moisture, mold, insects, fungi, bacteria, plants, or viruses - damages caused by these factors.
- Prolonged exposure to atmospheric, thermal, chemical, and biological factors - damages resulting from the slow action of these factors.
- Radioactive leaks, contamination, or environmental pollution - damages resulting from these events.
- Natural wear and tear, depreciation over time - damages related to the natural aging and wear process.
- Computer viruses - damages caused by software disrupting the operation of computers or networks.
- Construction work performed by unauthorized persons - damages resulting from work performed by unqualified persons.
- Construction errors or structural defects - damages resulting from design, execution, or material errors.
- Improper use, storage, or maintenance - damages resulting from improper treatment of the insured item.
- Loss of the insured item due to appropriation or misplacement - damages resulting from these causes.
- Uninhabited or unused insured object for 60 days - unless such condition has been reported and approved by the insurer before the contract is concluded.
- Insurance in Practice
- The GTC and its provisions clearly define when you can receive compensation (and when not), but let's illustrate a few damages for which you can expect proper protection.
During construction, there are strong winds that tear off the roof and additionally damage the construction site and secured materials. The wind was sudden and unexpected, so the insurance will cover all damages.
There was a break-in with vandalism in a house at the closed shell stage. Permanent elements were destroyed, and installations such as radiators were stolen. If the policy includes burglary coverage, it will be covered by the insurance.
During the construction of several houses simultaneously (e.g., row housing or a housing estate), an unusual event occurred - a neighbor's scaffolding fell on our house. Even such damage can be covered by insurance, but since it is a non-standard risk, it is worth checking the policy scope.
In general, it is worth remembering a simple rule regarding the scope - we can insure on an all-risk basis (i.e., against everything not excluded) or named perils (specific risks indicated in the policy).
What Happens to the Policy After Construction is Completed but the Insurance Period is Still Ongoing?
According to the general terms and conditions of Allianz My Home, the policy will be modified.
If the construction of the house or apartment is completed before the insurance policy expires, the sum insured does not change, but its purpose is adjusted to the new state of the property:
For a house or apartment - the sum insured initially intended for a house under construction or apartment under construction is converted into the sum insured for a completed house or apartment.
For a utility building or utility premises - in the case of utility buildings or utility premises, the completion of construction means that the sum insured originally assigned to the building or premises under construction is converted into the sum insured for a finished utility building or utility premises.
For building materials - the sum insured that initially covered building materials is converted into the sum insured for household movable property.
This change in the sum insured's purpose is automatic and allows for the continuation of insurance coverage after construction is completed, adjusting the coverage to the current use and function of the property.
Why is it Worth Purchasing Home Under Construction Insurance?
I think all the above paragraphs argue quite well why insurance for a house under construction is worth considering, regardless of whether it is a single-family house, multi-family house, apartment, or other buildings specified in the GTC. To summarize:
Insurance covers everything that can happen to your dream house during construction or at the end of the period. After accepting the house, it is, of course, best to insure it fully.
You gain peace of mind, and you don't have to stress about various random events or problems in construction after, for example, vandalism or theft of building materials.
Insurance may, of course, be required by the bank, but you have the right to know exactly what the coverage includes and choose the best insurance - the bank cannot impose its product on you.
In short, home insurance reduces financial losses resulting from random events related to the property.
If you are still undecided, I invite you to a non-binding consultation, where I can discuss in more detail why it is worth taking care of the protection of a house under construction before you move in.
