Construction Insurance

Construction Insurance - Construction insurance (formerly: building insurance) protects the building owner and the companies involved in the construction project against unforeseen damage to the construction work during the construction period. The policy covers damage caused by weather conditions, vandalism, structural defects of unknown origin, theft of permanently installed components, and force majeure. The insurance coverage ends upon acceptance of the building.

Scope of Coverage and Benefits

Construction insurance covers unforeseen damage or destruction to the structure under construction. Specifically, it includes:

• Weather damage: Heavy rain, storms, frost, or flooding that damages materials or components already installed. Particularly relevant are frost damage to fresh concrete or screed, as well as water damage to building shells without a roof.
• Vandalism and theft: Willful destruction and theft of permanently installed components-but not of loosely stored materials or construction machinery.
• Unknown characteristics of the building site: Unexpected soil conditions leading to settlement or landslides, provided they could not have been identified in the soil investigation report.
• Construction and material defects: Provided they only become apparent as a result of the damage and were not previously recognizable.
• Force majeure: Extreme events such as earthquakes, hail, or flooding, provided that flood zones not designated in the zoning plan are affected.

Not covered are defects resulting from faulty planning or execution (standard warranty), damage due to normal wear and tear, as well as damage to construction machinery, tools, and loosely stored building materials.

Distinction from Other Construction Insurances

Construction insurance is part of a sensible insurance package during the construction phase. Each insurance policy covers a specific risk area:

Insurance	Covered Risk	Taken Out by
Construction Insurance	Property damage to one’s own structure	Builder or General Contractor
Builder’s Liability	Damage to third parties (passersby, neighbors)	Builder
Fire Insurance for the Building Shell	Fire damage to the building shell	Often included free of charge in comprehensive home insurance
Construction Helper Accident Insurance	Accidents involving private helpers	Builder (mandatory reporting to BG BAU)
Construction Completion Insurance	Insolvency of the contractor	Builder

Fire insurance for the shell of the building is often included free of charge in many residential building insurance policies for the shell construction phase-check with your insurer before taking out a separate policy. Accident insurance for construction helpers must be reported to BG BAU as soon as private helpers (relatives, friends) begin working on the construction site.

Costs and Contract Term

The premium is based on the construction cost and the estimated construction period. Guidelines:

Construction Cost	Premium (0.15-0.30%)	Example (0.20%)
€200,000	€300-600	€400
€400,000	€600-1,200	€800
€600,000	€900-1,800	€1,200
€800,000	€1,200-2,400	€1,600

The insurance coverage begins with the groundbreaking and ends with the final inspection. In the event of construction delays, the insurance coverage must be extended in a timely manner-failure to do so may result in a denial of benefits in the event of a claim. We recommend applying for the extension at least four weeks before expiration, as construction delays are common in the Nuremberg region due to a shortage of skilled workers and material lead times.

Typical Damage Scenarios and Costs

Based on practical experience, the following types of damage occur particularly frequently:

• Frost damage to screed: Night frost damages freshly laid screed - costs €3,000-8,000 for removal and reinstallation
• Storm damage to scaffolding or roofing: Falling scaffolding parts, blown-off tarps - costs €5,000-15,000
• Burglary and theft of installed heating systems: Copper pipes and radiators stolen - costs €8,000-€20,000
• Heavy rain in an open building shell: Soaked ceilings and walls, risk of mold - costs €10,000-€40,000

Practical Tip for Property Owners in Nuremberg and Franconia

We recommend that builders in the Nuremberg metropolitan area take out construction insurance before starting construction-especially for projects that extend into the winter months, as frost damage to fresh masonry or screed can result in significant costs. In the Nuremberg region, heavy rain and storm events have become more frequent in recent years; climate change increases the risk of such damage at construction sites without roof coverings.

Make sure the sum insured covers the total construction costs, including work performed by the owner. Homeowners who perform parts of the work themselves should check whether their own work is covered-this is not the case with all policies. Also ask for a co-insurance clause for subcontractors so that damage caused by the general contractor’s subcontractors is also covered.

Frequently Asked Questions

As a builder, do I absolutely need construction insurance?

There is no legal obligation, but the insurance is strongly recommended. Without it, the building owner bears the full risk for unforeseen damage during the construction period. A single instance of heavy rain damage to an open building shell can result in five-figure costs-the ratio of the premium (600-1,200 euros for a construction cost of 400,000 euros) to the potential amount of damage almost always justifies the insurance. For projects with external financing, some banks also require proof of construction insurance as a condition for disbursement.

Who takes out the construction insurance-the building owner or the contractor?

As a rule, the building owner takes out the insurance, since, as the owner of the structure, they have the greatest financial interest in protection. In the case of general contractor agreements, the general contractor may also provide the insurance-in this case, the building owner should verify whether they are listed as a co-insured party in the contract, whether the sum insured covers the total construction costs, and whether the policy term aligns with the construction schedule. In case of doubt, a separate building owner’s policy is the safer solution, even if it entails additional costs.

How does construction work insurance differ from builder’s liability insurance?

Construction work insurance covers property damage to your own building, while builder’s liability insurance covers damage to third parties-such as when a passerby is injured by falling materials, a neighboring building is damaged, or a visitor to the construction site falls. Both types of insurance cover different risks and complement each other. Anyone who has only one of the two types of insurance is not covered in a relevant damage category. We recommend purchasing both types of insurance as a package-many insurers offer combined construction rates that are more affordable than individual policies.

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