Illusion No. 14: With real estate, the only certainty is that nothing is certain!

Property owners and tenants are repeatedly confronted with various insurance issues that arise during both the construction and use phases of a building. The subject of insurance is complex and often leads to a great deal of uncertainty. It is therefore worth taking a closer look at the different types of insurance and their characteristics.
 

The amendment to the Insurance Contract Act (VVG) came into force on July 1, 2009. If the property changes hands, the rights and obligations arising from the insurance contract for private property and liability insurance are transferred to the acquiring party, unless it notifies the insurance companies in writing within 30 days of the transfer of ownership that it rejects the transfer.

1. insurance for the property owner

Buildings insurance
Buildings insurance is compulsory in all cantons in Switzerland and is offered by various private insurance companies (e.g. Canton of Geneva) or by a public insurance company (e.g. Canton of Zurich), depending on the canton. The following main risks are covered:

• Fire and fire damage
• Natural hazards (e.g. caused by earthquakes, hail, storms, avalanches or landslides)
• Water damage due to external influences (e.g. flooding)
• Possible burglary and glass breakage (included in buildings insurance depending on the canton)

Buildings insurance covers the building and the fixed installations in it (e.g. tiled stove, built-in cupboards, sanitary installations). In addition to property damage, consequential damage such as clean-up and cleaning costs or loss of rental income are also covered.

Building water insurance
Building water insurance is not mandatory for all property owners. It covers the following events, among others:
Damage caused by water from pipe systems, damage caused by rain inside the building; snow and meltwater that has penetrated through the roof, for example; backwater from the sewer system or groundwater inside the building; water and other liquids that have leaked from heating and tank systems, cooling systems and heat exchange and/or heat pump circulation systems; overflowing bathtubs, pipes or radiators that have burst due to frost. In addition, the costs for searching (leak detection costs), unblocking burst pipes and bricking up repaired pipes are covered to a limited extent. The loss of rental income during the period of unusability can be insured.

Building glass insurance
Depending on the canton, glass insurance is either insured separately or included in the state building insurance. It covers glass breakage damage to glass that is permanently attached to the building. Common causes of damage include stress cracks in windows, birds flying into windows or carelessness when locking windows. If desired, the homeowner can insure only individual panes of glass in the building. In such a case, he should find out exactly what the insurance exclusions are. Various risks must normally be insured separately (e.g. wear and tear damage to washbasins, bidets, bathtubs, etc.).

Building liability
If an owner does not live in their property themselves or the property consists of more than three residential units, this insurance is mandatory. This also applies to condominiums, co-ownership or buildings with building rights. Building liability insurance covers compensation owed to third parties.

Examples include:
1. A child is injured by an unsecured rope in a playground; a tree falls on a visitor’s car. Visitor’s car. 2. a visitor slips on wet stairs and injures himself. An oil tank is defective and contaminates the groundwater. 3. legal, court and expert costs in the defense against unfounded claims.

As personal injury, property damage and financial loss are to be insured, the sum insured should be chosen accordingly high. As a rule, insurance cover of CHF 4 to 5 million per loss event is recommended.

2. insurance for tenants and owners

Household contents insurance
Taking out household contents insurance is highly recommended, even if it is not compulsory. It covers property damage caused to your own household contents and generally covers the following risks:  

• Water damage and natural hazards:
  Damage/destruction of furniture caused, for example, by an overflowing bathtub, leaking waterbed, breakage of a pipe to the washing machine or flooding.
• Theft:
  Burglary and robbery
• Glass insurance:
  Depending on the canton, you should find out whether the glass risks are already included in the building insurance. Normally, glass insurance is less expensive in household contents insurance.
• Various supplementary insurances are possible.
  The premiums vary depending on the type of construction, extinguishing options and value of the furniture (current value or replacement value insurance). The policyholder should periodically review the sum insured and adjust it to his needs.

Personal liability insurance
For tenants in particular, but also for property owners, it is advisable to take out personal liability insurance to complement the above insurance policies. The amount to be insured is normally between CHF 3-5 million per claim and covers the following property damage and personal injury in the Real Estate sector, among other things: Scratch marks in the parquet flooring; crack in the washbasin; torn wallpaper; own dog bites the letter carrier; guest slips on a wet floor and breaks his leg.

3. insurance for builders

Construction
Property value insurance protects the client against unforeseen construction accidents, theft or wilful damage during the construction period. It is not compulsory to take out this type of insurance, but it is highly recommended.

Due to the complexity and variety of insurance policies, we recommend the following procedure when taking out insurance:
1. Compare the respective benefits and premiums of the insurance companies.
2. Avoid double, over and, above all, underinsurance. Underinsurance and overinsurance are penalized with massive reductions in benefits for all insurance policies.
3. Consult a neutral and independent insurance advisor.
4. For new buildings with an ongoing guarantee period, insurance policies can possibly be omitted.
5. Ongoing, critical review of the personal insurance situation.

Builder’s liability
This insurance protects the builder, the owner of a property or auxiliary persons against third-party claims during the construction period. As with buildings liability insurance, these can include personal injury, property damage, loss mitigation, expert opinions, legal fees and court costs. According to a federal court ruling, this personal injury and property damage insurance is mandatory for the client, otherwise the architect would have to assume liability. Normally CHF 2 – 5 million is insured per case.

Construction period insurance (progressive building insurance)
This type of insurance is mandatory for building owners in most cantons. As with buildings insurance, the insurance cover applies to tangible assets and insures them against fire, water, glass and natural hazards that occur during the construction period. The insurance must be taken out at the start of construction and ends when the building is transferred to the buildings insurance.

PDF Illusion No. 14

Author: Claude Ginesta

Claude A. Ginesta is a Federally Certified Real Estate Trustee and CEO/Owner of Ginesta Immobilien AG.
The company was founded in 1944 and specializes in real estate sales in the Zurich and Graubünden regions. For properties of supraregional significance, the company operates as a real estate broker throughout Switzerland via its branches in Küsnacht, Horgen, and Chur.

Publisher of the Illusions series Ginesta Immobilien AG, www.ginesta.ch