What Is Demolition Insurance?
Demolition insurance is insurance for property owners that is used to cover the costs of demolishing a building that is damaged by a peril, such as a fire or a storm. Zoning requirements or building codes may require that a damaged building be demolished rather than repaired. It may even be more cost-effective to do so.
In these scenarios, demolition insurance protects the property owner. Demolition insurance also covers the cost of tearing down undamaged portions of a damaged structure.
Demolition insurance also refers to insurance taken on by contractors that covers bodily harm or property damage during the demolition process.
- Demolition insurance is insurance for property owners to cover the costs of demolishing a structure that has been damaged by a peril.
- Demolition insurance also refers to insurance that contractors take on to protect themselves, the property, and others during the process of demolition.
- Holders of demolition insurance should check their policies for a debris removal clause that covers the removal of debris after demolition.
- Common types of contractors that require demolition insurance include welding, blasting, and piling contractors.
- Not all homeowners insurance policies include demolition insurance, and the ones that do might only cover a percentage of the costs.
Understanding Demolition Insurance
Catastrophe insurance will cover an insured's losses due to a catastrophe, such as a hurricane or fire. If a catastrophe results in a structure not being able to be repaired and, therefore, has to be demolished, demolition insurance will cover the cost of demolition for the property owner.
Property owners should also check their property insurance policies for a debris removal provision, which covers the cost of removing debris and pollution that may result from demolition.
In the demolition process, contractors are hired to demolish a structure. Demolition is a dangerous process, so contractors take out demolition insurance to protect their employees against injury on the job, any nearby civilians that were injured by the demolition, or in case a part of the property that was not going to be demolished is damaged by them.
Much of this type of insurance can be covered under workers' compensation and commercial general liability insurance, depending on the policy.
The types of contractors that need demolition insurance are usually welding, blasting, and piling contractors.
Homeowners Insurance and Demolition Insurance
The typical homeowners policy may or may not cover demolition and debris removal, depending on the state and policy type. HO-1, one of the most common policies, covers damage from fire, lightning, windstorm (unless you live in a hurricane zone), hail (not available everywhere), explosion, riots, civil commotion, aircraft (and debris falling from aircraft), vehicles striking the house (and items thrown from vehicles), smoke, vandalism (although some policies exclude this), malicious mischief, theft, and volcanic eruption.
HO-2 adds coverage for falling objects, the weight of ice, snow, or sleet, flooding from your appliances, plumbing, HVAC, or a fire-protection sprinkler system, damage to electrical parts caused by artificially generated electrical currents (such as a power surge not caused by lightning), glass breakage, and an abrupt collapse.
Some policies cover demolition but only up to a stated percentage of the cost of rebuilding. So if you have $100,000 worth of damage covered under the policy, and 25% coverage for demolition, you'd get $25,000 less whatever your deductible is.
Debris damage works the same way, but this gets complicated if, say, a wind storm knocks down a bunch of trees and tears up your yard. The same 25% would apply, but only of the total cost of the claim, which could well be mostly the debris removal. In this case, you'll be short of what you need to put your property back in pre-storm shape.
In addition, some policies have a section called "additional coverage" that may add a lump sum of say $10,000 to any debris removal or demolition coverage.
Most people who buy homeowners insurance file the policy away without reading it. It's only when there's a claim that you start looking at what's really covered and for how much. This can end up being costly if your coverage is limited.