How much does decennial insurance cost?

Why is there no fixed price?

Decennial insurance is paid with a single premium, which the insurer calculates by applying a rate to the sum insured. That rate depends on the technical characteristics of the risk and on the guarantees taken out, so two projects with the same budget can have very different premiums.

In practice, the price depends on the material execution budget (PEM), the type of building, its location and the outcome of the technical control. That is why each project needs a tailored study.

The factors that determine the premium

1. Type of construction. The basic design and the construction design define what is being insured: a single-family home, a residential building, offices, a shopping centre, a hotel, a sports centre, an auditorium…
2. Construction features. The number of storeys and basements, the type and depth of the foundations (pad footings, raft…) and the type of structure (concrete, steel, timber, prefabricated modules…) affect how difficult the build is and, therefore, the cost of the insurance.
3. The ground. Silty soils or expansive clays, rocky substrate with or without a risk of sliding, a water table affecting the foundations or a steep slope all push up the premium. That is why a proper geotechnical study is essential, with its findings applied in the construction design.
4. The sum insured and its indexation. The value of the works allows the premium rate to be adjusted, and adding automatic indexation entails an additional cost. Indexation percentages usually range from 3.5% to 5% a year and also apply to excesses. We explain this in the guide to the sum insured.
5. Waiver of recourse against building agents. If the insurer waives its right to seek recovery from the contractor, the designer, the works director or the construction execution director, a surcharge applies that depends on whether or not those agents are on the developer’s staff.
6. Optional guarantees. Covers such as waterproofing or existing property are added to the premium for the basic guarantee. We review them in decennial insurance guarantees.

Aggravated risks: what drives up the premium

Aggravated risks are those which, because of their structural characteristics, materials, techniques or the ground they stand on, require the insurer to carry out a more detailed analysis and usually give rise to surcharges. The thresholds vary from insurer to insurer; the following are common benchmarks.

Building

• More than 10 storeys or more than three basement levels.

Ground

• Clays, silts and loose sands, especially expansive clays.
• Compacted fill, improved soils or imported fill for the foundations.
• Quarries and karstic or mining ground.
• Slopes greater than 10%.
• A water table affecting the foundations, with no information available or with considerable fluctuations.

Structure

• Spans of more than 7.5 metres and cantilevers of more than 2 metres.
• Steel structures and structural panels.
• Traditional structures with load-bearing masonry walls and timber elements.
• Prefabricated elements, except floor slabs with precast joists.

Non-traditional materials and systems

• Thermal clay blocks in load-bearing elements or composite systems.
• Autoclaved aerated concrete.
• Prefabricated systems and timber buildings.

Characteristics of the works

• Works where technical control does not start when work begins.
• Works already well advanced when the insurance is applied for.
• Renovations, refurbishments, extensions and, in general, works on existing buildings.

Aggravating factors in optional guarantees

Some circumstances make optional guarantees more expensive or harder to obtain:

• Façade waterproofing: non-traditional materials or systems, prefabricated elements or finishes, and exterior glass façades bonded with structural silicone (VEC) or clamped to an inner structure (VEA).
• Roof waterproofing: single-layer systems without heavy protection, PVC membranes and rooflights.
• Waivers of recourse: a waiver in favour of designers and the site management team without a dependency relationship with the policyholder to justify it, and a joint waiver in favour of the contractor and the technical team.
• Indexation: indexation of the sum insured above 5%.

How to keep the cost of decennial insurance down

Many of the aggravating factors can be reduced with information and good technical control:

• Take out the policy before work begins. Technical control not starting with the works, or the works being well advanced, is in itself an aggravating factor.
• Have a good geotechnical study and apply its conclusions in the construction design.
• Choose an experienced Technical Control Body (OCT). Good preventive control of the design makes it possible to check that the ground has been taken into account, that the techniques and materials are suitable and that the design complies with regulations, and to correct it in time if necessary.
• Match the sum insured and the guarantees to what the project really needs.
• Compare the market. A broker with access to the main specialist decennial insurers operating in Spain can negotiate the terms for each project. At Seguróx we study each project and present it to those insurers.

How is the premium paid?

When the insurance is taken out at the start of the works, the premium is paid in two instalments: a premium on account when the pre-policy is formalised, the percentage of which depends on the insurer, and the rest when the entry into cover is issued, after handover of the works. If it is taken out once the works are finished, a single payment is made.

The initial premium is calculated on the estimated sum insured; the final premium is set in the entry-into-cover endorsement, based on the declared final value of the works. The steps are explained in how to take out decennial insurance.