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Building in Course of Construction Insurance

The contractor of a building may, in many cases, be required by conditions of a contract to effect a fire insurance policy for their completed value during the whole term of the contract.

It will be unfair to charge a full premium because the value at risk in the earlier days of the contract is small and gradually increases as construction progresses until full value of the property is attained toward the end of the contract.


At this end, it’s the practice     of insurers to arrange such insurances by any one of the following methods.


Where the risk is relatively of small magnitude, the practice is to apply 50 per cent of the sum insured in calculation of the premium. The insured will be in full value of the property at the time of completion

Provide for monthly declarations of value and then take the sum insured as the value of average declarations. When the contract is finished, the actual premium is calculated compared with the original provisional premium and an adjustment is done.

This involves either refund of premium being given or additional premium being paid.

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