An insurance cover for structural defects in buildings

HDFC Ergo has launched ‘Inherent Defects Policy', a first-of-its-kind product in the non-life insurance sector.

The policy will compensate for the cost of repairing, restoring or strengthening of a new building or civil structures caused by inherent structural defect.

This product addresses one of the requirements of the recently enacted Real Estate (Regulation and Development) Act 2016 (RERA) that has mandated real estate builders to rectify any structural defects within thirty days, if brought to their notice in a period of five years from the date of handing over possession.

The cover is different from the standard property insurance cover. The inherent defects policy covers all those risks that are not covered by the fire policy. Besides structural defect, this will include poor workmanship. Since even small damages are covered, the premium is higher than what is paid out for property insurance.

The policy can be also be assigned to the new property owners. This means that if an apartment block is sold and the property is transferred to a cooperative society, the policy can be transferred to the society. Another reassurance from the policy provider is the knowledge that the project has been audited at the time of construction. The insurance company will appoint an independent technical inspection service to carry out monitoring activities on the quality of the building during the course of construction. This will include services ranging from sample design checks to witnessing tests at site.

The new policy can be obtained by the developer prior to the start of construction and will have five-year validity, which is co-terminus with the liability of the promoter under the new law.