Buying a house is one of the most important decisions in life and, as such, it involves some risks that we must always consider, especially if it is a new home.
To protect us from the most serious damage to the building, there is the ten-year building damage insurance. But what exactly does this policy cover? When is the ten-year insurance taken out and who is responsible for it? In this post we tell you about it in detail.
What is ten-year insurance?
Let’s start with the most frequently asked question: what is a ten-year insurance policy?
The ten-year insurance is a policy that protects developers and owners of newly constructed homes against structural damage to the building that may threaten its safety and habitability requirements.
It is a ten-year guarantee, which means that it will be valid for 10 years from the end of construction. In that decade, the buyers of the house will receive a compensation or, more usual, the insurer will assume the costs of repair in case that some defect of the construction or problem of the ground affects the stability of the building, and supposes a real risk for your house.
Decennial building damage insurance is sometimes confused with home insurance, but they are two very different policies. While the former covers damage due to construction defects affecting the structural elements of the building, a home insurance policy protects you against damage to personal property and damage to the interior of the home, such as theft, fire or water damage.
What does the ten-year building damage insurance cover?
So, what is the coverage of the ten-year insurance?
The main guarantee of this insurance is structural damage, that is to say, it covers damage to the building caused by defects or flaws originating in the foundations, supports, beams, slabs or load-bearing walls, and which are compromising the strength and stability of your homes.
How does it cover them? Either by indemnifying the purchasers and owners of the property, or by assuming the repair corresponding to such damage, as well as the expenses to reinforce and prevent the threat of subsidence. This protection is valid for a period of 10 years from the completion of the work.
To give you a better understanding, a possible cause could be a problem in the beams, in the load-bearing walls or in the settlement of the ground. But it is not enough that there is a defect in the structural or constructive elements: it must pose a real risk to the safety of the inhabitants.
Depending on the level of protection desired by the developer, the policy may also include some additional guarantees, which are less important, but may also be useful to the developer to avoid assuming certain repair costs. For example:
- Waterproofing of facades and roofs. Protects against damage caused by possible water seepage due to construction errors, such as persistent dampness.
- Basement watertightness.
- Protection of pre-existing assets in case of subsequent alterations.
- Waivers of recourse. It includes the waiver of claims against contractors, designers and project management, promoting a more agile resolution of problems.
In some of these guarantees,the temporal scope of coverage is limited to 12 months or 3 years.
Compulsory ten-year insurance
But is ten-year insurance mandatory? Yes, it is, although it is only compulsory for residential buildings. For hotels, offices or shopping centers it is not mandatory, but it is recommended.
However, there is one important exception! If it is a self-builder who builds a single-family home for his own use, he is exempt from taking out this insurance, unless he is going to sell it to a third party within 10 years of its construction.
Who takes out ten-year insurance?
It is the developer of the building who is obliged to take out the ten-year insurance policy, with no possibility of cancellation within 10 years of taking out the policy. He must therefore be the policyholder.
This may be a developer or any private individual who is in charge of promoting a building project.
The protection will be double, because the beneficiary will not only be the real estate developer, but also the homebuyers.
When is the ten-year insurance policy taken out?
Regarding when the ten-year insurance is contracted, it is necessary to do so before starting the construction of the building.
PIB Group Iberia always recommends to opt for a construction insurance, which in addition to the ten-year insurance covers the civil liability of the construction company and the developer, and all possible material damages that may occur in the same work.
However, the real coverage begins when the construction of the property is finished.
Can the deed be deeded without ten-year insurance?
If the homes do not have this policy, they will not be able to register the new construction in the Land Registry and, therefore, will not be able to be sold or receive mortgage financing.
Ten-year insurance law
But what exactly does the Law say about it?
Article 19 of Law 38/1999 of November 5, 1999 , on Building Regulation defines ten-year insurance as “property damage, surety or financial guarantee insurance”.
According to the text, its purpose is to “guarantee, for 10 years, compensation for material damage caused to a building by defects or faults originating in or affecting the foundations, supports, beams, slabs, load-bearing walls or other structural elements, and which directly compromise its mechanical strength and stability”.
Ten-year insurance rates
One of the issues that most concern those who need to take out decennial insurance is usually its price. The truth is that, depending on the type of construction we are talking about, the cost can vary greatly.
Normally, it is a single premium and is divided into two payments, the first being somewhat lower than the second, which takes place at the end of the work. But the amount depends on many factors, such as the final cost of the work, the date on which it was completed, its location, the optional coverages to be included…
It is important to compare between different insurance companies to perceive differences and to situate ourselves in reasonable market prices. The most common companies in these risks are insurers such as Asefa, Mapfre, Zurich…
At Moné we act as an insurance comparator, and we can help you choose the most favorable and economical policy for your specific case, don’t hesitate to ask us!
Ten-year insurance without OCT
Most developers hire Technical Control Offices (TCO) to be in charge of controlling, at a technical level, the execution of their construction in each of its phases. In fact, it is a requirement of the insurance companies in order to be able to subscribe the policy.
TCOs are usually architectural or engineering firms and their job is to develop a detailed report on the quality of the work in question. With this data, insurance companies can get an idea of the building they are going to protect.
It is not uncommon for insurers to refuse to protect a home if it is not supervised by an OCT. In fact, it is the most common thing to do. After all, it is a big risk that they must be able to take.
Even so, there are possibilities of taking out ten-year insurance without OTC. This is the case, for example, for completed works where the technicians have not had time to check the entire construction process.
Remember that at PIB Group Iberia we are here to help you and we work with a wide range of insurance companies. If you have any doubt related to this mandatory insurance and want to find a policy that really fits your needs, we are at your disposal,contact us and don’t let it pass you by!
