Malath Insurance says cost of inherent defects insurance for three-story premises ranges between 1-1.5% of construction value

Malath Cooperative Insurance Co.  said that the cost of inherent defects insurance (IDI) for up to three-story residential buildings ranges between 1% and 1.5% of the total construction value, in return for a 10-year insurance policy.

In a telephone interview with Argaam, Malath explained that the relevant policy value is made in two payments. First, 30% of the insurance premium is paid upon the policy issuance and before the issuance of a construction license.

The remaining 70% premium is paid after the completion of construction and before the issuance of the occupancy certificate, in addition to the technical inspection and value-added tax (VAT) charges.

The minimum premium is set at SAR 7,000, the company added, noting that the IDI of premises was applied in coordination with several insurance service providers across the Kingdom.

Insurance coverage of up to three-story premises was the last phase of IDI, which came into effect on July 1.

The IDI coverage includes any defect in structural works or the related envelope elements that undermine the stability of buildings, due to any error in the design, materials, geological investigation or construction, provided that the defect is undiscovered on the issuance date of the occupancy certificate.

Malath will compensate the insured for the costs of repairing, replacing and strengthening of the premises against the damages arising from inherent defects, which were reported to the insurance firm throughout the policy term.

The policy does not cover the cost of repairing, replacing and/or strengthening the premises following any physical damage or threat of imminent collapse throughout the policy term.

In December 2019, Malath obtained the Saudi Central Bank’s (SAMA), formerly Saudi Arabian Monetary Authority, approval to offer a construction guarantee insurance product that covers IDI, Argaam reported.

The product covers inherent defects in buildings, which may appear after the completion of construction, such as the building structure, water proofing, plumbing, electricity, mechanical works, and interior finishings.