Insurance for Real Estate Developers

What is insurance for real estate developers?

Insurance for real estate developers is a programme of policies that protects a project from land acquisition to handover: construction and erection cover while the building goes up, property cover for completed and unsold stock, and liability cover for the public and workers. It is designed around the project's timeline rather than a single annual policy.

This is one of the core areas of our property insurance practice. Over a two-year period, MILES insured 24 of 30 major project launches, so we know what developers, lenders and associations expect from the paperwork.

Cover during construction

Contractors' All Risk

Contractors' All Risk (CAR) insurance covers the permanent and temporary works, materials on site, and third-party liability for the full construction period. It responds to fire, flood, collapse, earthquake, theft and accidental damage, subject to its exclusions. The sum insured is the full contract value, including materials supplied by the developer.

Erection All Risk

Lifts, escalators, chillers, DG sets, STPs and fire-fighting systems are often better insured under Erection All Risk (EAR) insurance, which covers installation and testing. Many developers fold this into the CAR policy as a section.

Other covers on site

• Contractors' plant and machinery for tower cranes, hoists and excavators you own
• Marine cover for imported equipment until it reaches site
• Employees' compensation for directly engaged staff, and a check that each contractor holds its own cover for its labour
• Advance loss of profit, where the project is funded by rental income or has fixed delivery penalties

Cover after completion

Unsold inventory

Construction cover ends on completion or when units are handed over, whichever the wording says. Completed but unsold towers, retail units and parking remain your asset and need a fire and allied perils policy. The right form depends on the value at each location, often Standard Fire and Special Perils for larger projects. Values should reduce as units are sold and handed over.

Sample flats and sales galleries

Sample flats hold expensive fit-outs, furniture and electronics, and sales offices hold computers and sometimes cash. A fire policy with burglary cover protects these, along with public liability for visitors walking through a site that is still under work.

RERA and lender requirements

Section 16 of the Real Estate (Regulation and Development) Act, 2016 requires the promoter to obtain insurance notified by the appropriate government, including on title of the land and building and on construction of the project. The promoter pays the premium until the insurance is transferred, and the benefit passes to the allottees or their association. How this has been notified varies by state, so we check the rules that apply to your project.

Construction finance lenders usually require:

• the lender named as loss payee on CAR and property policies;
• sums insured matching the sanctioned project cost;
• cover in force for the full disbursement period, with renewals shared on time;
• notice to the lender before cancellation or reduction of cover.

Handover to the association

The most common gap we see is at handover. The developer's policy ends, and the new RWA or AOA has not yet placed its own cover. We plan the transfer: share asset registers and AMC details, confirm the date the developer's cover stops, and help the association start its own programme on the same day. Our page on housing society insurance explains what the association should buy.

What is not covered

• Faulty design and defective workmanship itself, though resulting damage may be covered under some CAR extensions
• Delay penalties and cost overruns, unless specific delay cover is bought
• Wear and tear, and losses discovered only at inventory checks
• Title defects, unless a specific title policy is arranged

How MILES helps

• We map every stage of the project and time each policy so there are no gaps between construction, inventory and handover.
• We check contract values, lender clauses and RERA wording against the policy schedule.
• We compare terms across 16+ insurers and negotiate deductibles suited to project size.
• We manage claims on site with surveyors and contractors, and coordinate with lenders on payments.

What we need for a quote

• Project location, land area, number of towers and floors
• Construction cost and breakdown by civil, MEP and finishing
• Project timeline and expected possession date
• Contractor structure and existing contractor policies
• Lender name and insurance clauses in the sanction letter

Cover, exclusions and premiums depend on the insurer’s policy wording and underwriting. MILES Insurance Brokers Pvt. Ltd. is an IRDAI-licensed direct broker (Life & General, Reg. No. 954); the insurance is issued by the insurer. Insurance is the subject matter of solicitation.