Decennial insurance guarantees: basic, supplementary and optional

The basic structural damage guarantee

This is the cover required by article 19 of the LOE: for ten years from handover of the works, it guarantees compensation for material damage to the building caused by flaws or defects originating in or affecting the foundations, load-bearing elements, beams, floor slabs, load-bearing walls or other structural elements, and that directly compromise the building’s mechanical resistance and stability.

It also includes damage to the external works that is the direct consequence of a covered claim. Its scope is explained in the guide what is decennial insurance, and its limits in what decennial insurance does not cover.

Supplementary guarantees: debris removal, salvage and indexation

In the event of a claim covered by the basic guarantee, the insurer also pays:

• Demolition and debris removal costs: the additional costs of demolishing the insured property and transporting the debris to the nearest place where it may be deposited.
• Salvage costs: the additional, justified costs, and the damage to the insured property, caused by the measures needed to mitigate the effects of a claim. Their cost may not exceed the amount of the damage avoided.

This cover has three limits:

• The combined total for both items may under no circumstances exceed the sum insured as the value of the building, because it is an additional guarantee.
• The claim must be covered by the basic guarantee, meaning it must involve damage that affects the structural stability of the building.
• It does not include just any action taken by the developer after the claim, only actions aimed at demolishing and removing debris or mitigating its effects.

The other usual supplementary guarantee is automatic indexation of the sum insured, which updates it every year. How it works is explained in the guide to the sum insured.

Waiver of recourse against building agents

When the insurer pays a claim, it may then seek recovery from the agents responsible for the damage. Waiver of recourse, also known as waiver of the right of recovery, is an optional guarantee under which the insurer waives those actions against the agents designated, except in the event of an intentional act, wilful misconduct, breach of contract or fraud.

It can be taken out for some or all of these agents:

• Main contractor.
• Design architect.
• Architect acting as works director.
• Construction execution director.

The developer, as policyholder, decides whom to include; it is not obliged to include all of them. The waiver is agreed individually and each protected agent is identified in the entry-into-force endorsement by name or company name, registered address, the parts of the works in which it is involved and the amount of its contract.

It is included for an additional premium, which is usually moderate relative to the protection it provides. The amount depends, among other things, on whether the agents are on the developer’s staff; see the price of decennial insurance for details.

Waterproofing of roofs, façades and basements

These are optional covers that can be added separately. With them, the insurer takes on:

• Repair or replacement of the elements that ensure the waterproofing of roofs, terraces, pitched roofs, façades and basements damaged by design errors or defects in materials or workmanship, provided that they have led to material damage caused by water.
• Repair of other parts of the building insured under the structural damage guarantee that are damaged as a result of such claims.
• The reasonable cost of repairing the parts that have to be damaged intentionally and necessarily in order to repair the damage.
• Debris removal costs for the damaged parts, up to 10% of the total final cost of the roof.

Their duration depends on the insurer: they usually cover three years, and some insurers offer longer terms.

These guarantees come into force twelve months after the basic cover, provided that no damage due to missing or defective waterproofing or watertightness has appeared during that observation period. If it does, it must be repaired and a new twelve-month observation period begins. Some insurers also require a final report from the Technical Control Body without reservations.

Damage to existing property in refurbishments and renovations

Existing property means real estate that already existed before the works and on which, in whole or in part, the insured refurbishment, renovation or alteration works are carried out.

With this supplementary guarantee, the insurer extends cover to material damage suffered by that property as a result of a claim originating in the insured works and covered by the structural damage guarantee. Depending on the insurer, it may be offered in a standard or extended form.

• Only the property listed in the specific conditions of the policy is protected.
• Structural elements outside the insured works that support them or contribute to their stability are not considered existing property.
• Compensation for the entire insurance period may not exceed the first-loss sum insured, which is not indexed even if the main sum insured is.
• It takes effect at the same time as the main guarantees: with the entry-into-force endorsement, on the date of the handover certificate.

Other optional guarantees

Depending on the insurer, the policy can also be extended with:

• Mechanical resistance of façades.
• Rehousing costs for occupants while a covered claim is being repaired.
• Loss of rental income, when a covered claim prevents the property from being let.
• Secondary works: elements that are not part of the structure, such as façade enclosures, roofs, finishes, partitions, false ceilings, joinery or insulation.

The availability and terms of each one vary between insurers, so they should be checked in the specific offer.

Which guarantees are worth adding?

The choice depends on the type of works and who is involved in them:

• In refurbishments and renovations, the existing property guarantee protects what was already there.
• If the developer wants to protect its contractor or technical team against claims by the insurer, waiver of recourse is the option.
• In buildings intended for letting, loss of rental income and rehousing costs cover the repair period.
• Roofs, façades and basements are prone to leaks; the waterproofing guarantees cover that risk during the first few years.

Each guarantee added increases the premium, so they should be matched to the real needs of the project.