How to insure redevelopment or apartment remodeling

How to insure redevelopment or apartment remodeling

When we begin repairs in the apartment, many of us have a desire to experiment with planning options in order to create a more convenient and cozy atmosphere. But at the decision-making stage of redevelopment or reconstruction, few think that some design decisions with structural elements and utilities can cause certain problems. In particular, the presence of unlawful redevelopment or reorganization may become an obstacle both at the stage of concluding an insurance contract and at the stage of receiving reimbursement.

Today we will talk about how the presence of redevelopment and reorganization affects the interaction with insurance companies.

1. What is redevelopment and reconstruction, what risks do they bear

In accordance with article 25 of the Housing Code of the Russian Federation:

– the reconstruction of a dwelling is the installation, replacement or transfer of utility networks, sanitary, electrical or other equipment that require changes to the technical passport of a dwelling;

– redevelopment of a dwelling is a change in its configuration, requiring changes in the technical passport of a dwelling.

But not all types of redevelopment and reorganization can be agreed with the local government and included in the BTI technical passport. The main requirements for their implementation are described in detail in Chapter 4 of the Housing Code of the Russian Federation and in the Decree of the Government of Moscow of October 25, 2011 No. 508-PP. Based on this regulatory document, three main groups of redevelopments and reorganizations can be distinguished:

– requiring approval by notification;

– requiring approval of the project;

– Prohibited redevelopment / conversion.

When considering the issue of accepting an insurance object, the insurer evaluates the changes made in terms of the probability of the occurrence of the insurance event. That is, the property being taken is evaluated in a comprehensive manner, taking into account the technical characteristics (deterioration of the building, material of walls and floors) and the parameters of the desired insurance (objects of insurance, risks, insured amount, insurance period). Redevelopment and remodeling, agreed upon by notification, most often do not affect the risk assessment by the insurer, except for redevelopment in houses with mixed and wooden floors. In these types of apartment buildings, the probability of an insurance event due to the most minor changes is most likely. For example,

Apartments with existing redevelopment or conversion requiring approval of the project can also be accepted for insurance without making appropriate changes to the BTI plan at the date of conclusion of the contract. But the tariff for such redevelopments and conversions often increases significantly. For example, the creation of a new bathroom with a wet spot transfer can increase the insurance rate by one and a half times.

Development of the Russian insurance market in 2015

2015 was a continuation of the vibrant 2014. If last year the main focus was on compulsory motor liability insurance, in 2015, “cleaning ranks” of insurers was added to it. During the year, 70 insurers left the market. According to the regulator, another 138 companies are in the “risk zone”. There are even claims to systemically important insurers.

The presence of prohibited redevelopment does not mean a clear refusal to accept the object for insurance. Depending on the type of redevelopment / reorganization and the technical characteristics of the property accepted for insurance, the insurer can accept property insurance either at a higher rate or with a certain risk excluded from insurance coverage.

For example, one of the most common redevelopments is the combination of a living room with a loggia with a radiator. The local government for such a redevelopment may refuse approval, and the insurer will most likely accept such an object for insurance against risks associated with structural elements, since the risk of causing structural damage due to such redevelopment is insignificant.

When insuring civil liability during the operation of residential premises, the approach to assessing redevelopment is much tougher. The insurer may accept for insurance an object with redevelopment or reorganization on property risks, but refuse on civil liability risk, since the work performed may not cause significant damage to structural elements, but cause significant damage to neighboring rooms.

2. How to insure an apartment with redevelopment

When deciding on insurance of your property that does not comply with the BTI plan, you need to clearly understand that the presence of unlawful redevelopment, about which the insurer was not notified at the time of the conclusion of the contract, can serve as a reason for refusing to pay when an insured event occurs.

When deciding on property insurance, many people prefer boxed products. This method is convenient and easy to arrange, because you can buy such insurance without wasting time, for example, using the appropriate section on Banks.ru.

But with property insurance with redevelopment or reorganization, it is better to refrain from this method of insurance. Most boxed insurances contain a clause stating that the policyholder confirms that there are no unauthorized redevelopments or reorganizations in the insured property. Even if such a direct reservation is not included in the text of the insurance policy itself, then the property insurance rules of most companies contain a clause according to which is not an insured event and the damage caused as a result of violation of the rules of property operation is not compensated. These include the unlawful redevelopment. It is not possible to make changes to the boxed product or to note the presence of redevelopment.

When filling out an application as part of a classic property insurance or mortgage insurance, it is worthwhile to indicate as much as possible information about the existing redevelopment of the apartment. And if there is an assessment report containing a project image of the redevelopment carried out, or a written approval of the redevelopment work received from the competent authorities, provide them to the insurance company. The insurer may request additional information to assess the degree of risk. For example, photographs of the property being taken for insurance, or a certificate from the State Unitary Enterprise “Mosgaz” (in case of reconstruction works involving gas equipment), or other design or authorization documentation.

In the absence of this documentation, the insurer may revise the tariff or exclude certain risks from insurance coverage. For example, in the absence of a certificate from the State Unitary Enterprise “Mosgaz” in case of moving a gas stove in the apartment, the insurer has the right to decide to increase the tariff or exclude damage from the gas cover due to a gas explosion. If your redevelopment or reconstruction is a serious violation of construction, sanitary and hygienic, operational standards and fire safety rules, then the insurance company will most likely refuse to conclude an agreement.

When applying for a civil liability policy in the event of real estate redevelopment, it is worth paying attention to the fact that not all insurance companies are ready to cover the damage resulting from an existing redevelopment (reorganization), which is directly indicated in the insurance rules.

3. Mortgage apartment insurance at the stage of redevelopment

Since an apartment purchased with a mortgage is a pledge at a bank, it is possible to agree on a redevelopment at BTI only if there is a written agreement with the pledge holder. According to the law, the pledged property must be insured. But, since many insurers do not cover the risks associated with the construction, installation or repair work, or cover, but with a significant increase in the tariff, the mortgage bank will require permission from the insurance company to carry out these works.

To obtain consent from the insurer, you will need to provide the insurance company with a notice of the planned work, completed in the form of the insurer. The notice contains complete information about the planned work: type of work, timeline, contractor. If the planned redevelopment requires coordination with the relevant technical services, the project must be attached to the notification. The project involves: a title page, a description of the planned repair work, an explication of the premises before and after the redevelopment / redevelopment, a plan of the room before and after the redevelopment / redevelopment, with the organization seals and signatures of the responsible employees carrying out this project. In the case when such approval is not required, a sketch is attached to the notification – an apartment plan before and after the changes.

To coordinate the inclusion of risks associated with redevelopment work, the insurance company may increase the tariff for the period of the specified work. So when planning repairs, be prepared for an additional, if not the most significant, item of expenditure.

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