Inherent Defects Insurance

The Inherent Defects Insurance Policy is aimed at owners of buildings and land development companies. The Insurance provides the Insured with a long-term guarantee against damages which threatens the stability and durability of the Structural Components of an Insured Building due to errors or omissions in the design, specifications, workmanship, materials or to a combination of these factors. The Policy indemnifies the Insured for the cost of replacing or partially rebuilding or repairing the Insured Building.

What is Inherent Defects Insurance?


Inherent Defects Insurance provides an indemnity to the Insured for replacement or repair of the Insured Building which has suffered sudden accidental physical loss or damage of the load-bearing parts of the Insured Building threatening the stability and strength of the Insured Building. In addition, the insurance extends to provide indemnity for

  • total or partial replacement of the Insured Building,
  • the costs and expenses incurred for repairs and remedial works to be carried out in order to carry out any corrective works for the prevention of such damages provided that such causes existed and were not discovered at the date of issue of the Take Over Certificate at the beginning of the Maintenance Period.

and such loss or damage was caused by errors or omissions in the design, specifications workmanship or materials.


Is there cover for defective or inadequate waterproofing?

Coverage may be extended to compensate the Insured for the costs and expenses he may incur

  • for repairing defective or inadequate waterproofing of any part of the Insured Building, and
  • for the cost of repairing or replacing those parts of the Insured Building

directly caused by defective design, workmanship or inadequate waterproofing materials of the roof, exterior walls or of the basements.

What’s the Period of Insurance?

The basic Period of Insurance is for 10 years from the date of commencement of the Maintenance Period and provided that an acceptance by Insurers First Certificate of Approval has been issued at the beginning of the Maintenance Period. With regard to the waterproofing coverage, this Period of Insurance incepts at the end of the Maintenance Period and provided that the accepted by Insurers Second Certificate of Approval has been issued at the end of the Maintenance Period. The Period of Insurance for the two covers expires at the expiry of the 10 years from the commencement of the Maintenance Period.

What is the Coverage Amount/Sum Insured?

The Sum Insured is the total amount of the full replacement cost of the entire Insured Building at the time of such reinstatement as new. To this Sum Insured, an amount can be added for the costs of consultants, as well as expenses that may be incurred for the removal of debris. The Total Sum Insured may also be increased by an agreed annual indexation increase at the beginning of the cover.

When is such insurance coverage agreed?

Insurance coverage must be agreed upon with Turnkey Insurance & Reinsurance Brokers before the start of the construction work of the Insured Building.

When is the Insurance Policy issued?

It is understood that in order to be given any insurance cover, the appropriate Certificates of Approval (both the First and the Second Certificates of Approval if the relevant waterproofing cover will apply) must be provided to and approved by Insurers. Such Certificates of Approval are issued by independent and approved engineers and presented to Turnkey Insurance & Reinsurance Brokers.

Other Conditions applying

Condition 1

Any insurance should be provided through Turnkey Insurance & Reinsurance Brokers which must have also provided the construction insurance for the Insured Building under construction.

Condition 2

The cost of the independent and approved engineers to carry out the above mentioned Technical Audits and the issuing of the Certificates of Approval (both of them) are borne by the Owner and/or the land development company.

Condition 3

The cost of Inherent Defects insurance will be borne by the Owner and/or the land development company.

When are Technical Audits carried out?

(Certificates of Approval)


The Technical Audits are carried out by independent and approved engineers and begin during the design of the Insured Building and continue during construction works on regular and agreed time schedules. In the event that this ongoing audit does not exist, it will be almost impossible to provide the relevant coverage.

On the Provisional Handing Over of the Insured Building, the First Certificate of Approval will be issued by the independent and approved engineers and provided that the report is to the satisfaction of Insurers, then the basic coverage of the insurance policy (without the insurance cover for waterproofing) will be issued. For the waterproofing coverage to be provided, the Second Certificate of Approval must be issued at the end of the Maintenance Period and to the satisfaction of Insurers.


What is the Owner’s additional benefit beyond the ten-year insurance?

The Owner of the Insured Building will have throughout the construction of the project ongoing supervision of the works carried out by professional, independent and experienced engineers.

Why choose Turnkey Insurance & Reinsurance Brokers Ltd?

Turnkey Insurance & Reinsurance Brokers Ltd provides solutions to the insurance needs of customers who need specialized coverage. With many years of experience in the insurance markets both in Cyprus as well as abroad and specializing in the insurance of large projects under construction, Turnkey provides solutions and the best choices through an independent, professional and consistent approach.