Zurich Todo Riesgo Construcción — construction and erection all risks insurance
Technical parameters
What this policy is
Zurich Todo Riesgo Construcción, product 679. It insures the works themselves: what is being built and what it is being built with. It is taken out for a specific site and for the duration of the works.
This is an all-risks policy. Everything is covered that is not expressly excluded in the conditions. Named-perils policies work the other way round: only the listed events are covered. That is why in a TRC the key section of the contract is the exclusions, and that is the section to read.
What is insured
- Damage to the works themselves.
- Construction plant and machinery.
- Existing property — whatever stood on the site before the works began.
- Financial loss from delay caused by a loss covered under the policy (ALOP).
Three groups of risk
Conventional. Fire, explosion and lightning strike. Fire is the main risk in building work, and the height of the building is a clear aggravating factor. Theft: construction materials are easy to resell, which makes theft a frequency loss here.
Natural perils (CATNAT). Wind and storm; hail, snow and rain; flooding; earthquake; ground movement, subsidence and landslip. This group produces the largest losses, in some cases a total loss.
Inherent in the works. Defective workmanship — lack of skill, negligence or malicious acts. Errors of design, materials and execution (LEG clauses).
And everything else: any other accidental and unforeseeable cause not expressly excluded.
Included at no extra cost
- Damage to the works
- Natural perils
- Theft and robbery
- Strike, riot and civil commotion
- Consequences of defect — LEG2 scope
- Debris removal and demolition
- Firefighting, salvage and measures ordered by the authorities
- Additional, extraordinary and acceleration costs
- Replacement of records, drawings and documents
- Professional fees
- Construction plant
- Extended maintenance
Added separately
- Own defect — LEG3 scope
- Terrorism
- Public authorities
- Property stored away from the site
- Damage to existing property
- Cost of obtaining permits and licences
- 50/50 clause
- 72-hour clause
- Automatic cover of the sum insured
- Limited maintenance or visits
- Construction machinery
The sum insured
The sum insured is the total value of the material execution of the works, including all ancillary work. It is also the maximum limit of indemnity for the whole term of the policy.
It is made up of: the value of materials; labour; construction plant at actual value (automatic first-loss cover); construction machinery at replacement value (only where expressly arranged).
The value of the works comes from the budget: PEM, the material execution budget; PEM + industrial profit + general costs = PEC, the contract execution budget. The sum insured matches the total cost of the budget, PEM or PEC.
Premium adjustment once the works finish
Within two months of completion the policyholder declares the final value of the insured works. On that basis the premium is adjusted according to the criteria set out in the contract. If the value has risen, paying the additional premium is compulsory — it is written into the general conditions.
Which works are accepted
New build: residential and office buildings; detached houses; industrial units; buildings for services such as schools, hospitals and care homes.
Refurbishment: with and without structural work. Structural elements are foundations, columns, beams, floor slabs and load-bearing walls.
Civil engineering: minor works and major works.
Some works go through the standard route and some need the underwriter to assess them individually — typically refurbishment affecting the structure, and complex civil engineering such as slopes, hydraulic works and ground retention. The underwriter decides on the basis of the documents, which is why the budget and the design go in before the quotation, not after.
What documents are needed
Documents are essential, and here is why: in construction the risk we are about to insure does not exist at the time of underwriting. With every other material damage risk the property can be surveyed; here there is nothing to survey.
There are no special questionnaires. The ordinary technical documents of the sector are used: from architects, engineers, technical control bodies (OCT), laboratories and geologists.
Basic set: the design or the memoria de obra, plus the works budget. Further documents: geotechnical reports, the programme of works, OCT reports, drawings.
For small refurbishment work with no structural element a memoria de obra is usually not issued: the budget and a short description are enough to assess the risk.
The TRC is the only policy in our range that insures something that does not exist yet. A flat, a shop or a car can be looked at: they are there. A building site cannot be — at the moment of underwriting there is a plot and a budget. So instead of a survey, the documents do the work: design, budget, programme, ground survey.
Hence the main practical rule: the quotation starts with the paperwork, not with the phone call. Without a budget and a description of the works no price can be given — not out of awkwardness, but because there is nothing to calculate from.
The second thing to understand up front: a TRC covers damage to the works, not everything that can happen on site. A construction project has other insurance needs, and they are separate policies: public liability towards third parties, employer’s liability for the workforce, the ten-year building guarantee, surety bonds. A TRC replaces none of them. If a contractor says «we have everything insured», ask which policy exactly.
Third, the modality. All-risks is wider than a named-perils policy. But it also moves your attention: read the exclusions, not the list of covers. We go through them with the client before signing.
And the money. The sum insured is the full value of the works per the budget, and it is also the ceiling on any payout. Understating the budget to save premium is a poor idea: the final value has to be declared on completion anyway, the premium is adjusted regardless, and in a claim a short sum insured will cap the indemnity.
Typical tasks that this policy solves
Agent's opinion