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FAQ - Inherent Defects Insurance

Any defect in the Structural Works or the Envelope weakening the strength and steadiness or stability of the Premises and attributable to a fault, error or omission in design, materials, geological investigation or construction which was undiscovered at the date of issue of the Occupancy Certificate .
Malath is the leader company that provides the product of Inherent defects in the Saudi market on behalf of other insurance companies
The insurance policy of all contractors all risks is suitable during the construction period and it does not cover the Inherent Defect in the premises after its completion, which is covered in the Inherent Defects policy.
Before starting the construction work, you must apply for Inherent Defects Insurance by filling the electronic proposal form available on Malath’s website and ensure to have complete information for the project data and documents as follows:
  • Information of: Contractor, Project owner, Designer Engineer and Supervising Engineer.
  • Plans, elevations and cross sections of the works to be insured.
  • Complete details and total cost of works for each building.
  • Interpretative soil investigation report.
No, You cannot do this as it is mandatory insurance for the contractor and not the owner.
Natural or juristic person licensed to undertake construction works, engaged pursuant to Building Contract, and mandated by the concerned authority to obtain Inherent Defect Insurance.
The party or parties named in the Schedule, their successors in title and their assignees (subject to Insurer’s agreement in writing) to the extent of their respective rights and interests in the Premises For the purpose of this Policy, the Contractor shall be the Insured before the start of the Period of Insurance, and the owner of the Premises shall be the Insured during the Period of Insurance.
No, Insurance procedures must be taken before obtaining the building permit.
The Insurer shall indemnify the Insured against the cost of repairing, replacing and/or strengthening the Premises following and consequent upon an Inherent Defect which is discovered and is notified to the Insurer during the Period of Insurance and not excluded herein causing any of the following events:
  • Physical damage to the Premises; or
  • The threat of imminent collapse to the Premises, which requires immediate remedial measures for the prevention of an actual collapse within the Period of Insurance.
The cost of reinstatement of physical loss or damage of total or partial collapse, or destruction of Insured Premises caused by Any Inherent Defects. The policy covers also the damages caused by an inherent defect in the waterproofing of envelope (external walls and roof) which protect the Premises from the ingress of water of any kind originating externally to the Premises. For the avoidance of doubt, this definition does not extend to any part of the Works serving to protect the Premises against the effects of humidity or condensation. The cover of waterproofing of basement is offered in option.
The amount Representing the full rebuilding costs of the Premises
  • Demolishing the premises or the removal of debris from the premises incurred by the insured up to the limit of indemnity prescribed in the schedule.
  • The legal, professional or consultants fees incurred by the insured up to the limit of indemnity prescribed in the schedule. The insurer will not be liable to the insured for fee incurred for the purpose of preparing a claim under this policy.
  • The additional costs of repair, replacing or strengthening which arise out of alterations in design, use of materials and methods of constructions.
IDI policy is compulsory to the contractors to insure against hidden defects that may appear in buildings and construction after their use (for non governmental buildings only) in accordance with Council of Ministers Decree No. 509 dated 09/21/1439 H and according to the decision of the Governor of the Saudi Arabian Monetary Agency No. (441/187) dated 05/08/1441 H.
The first phase (up to end of 12/1441H): High- Rise Buildings (Towers), Warehouses, Hospitals, Hotels, Gathering buildings (Mosques, Sports Premises) , Educational Buildings, Commercial Centers, Telecommunication Towers and Industrial Buildings.
The second phase ( starting from the end of first stage and up to end of 12/1442H): the following types In addition to the above mentioned buildings: Gathering buildings (Wedding Halls, Cinemas and Theaters) , Healthcare Centers, Furnished Hotel Apartments, Motels, Residential Buildings and Entertainment Services Buildngs.
The third phase (starting from the end of second stage and up to end of 12/1443H): the following types In addition to the above mentioned buildings: Business Buildings (Airports, Banks, TV Stations Post Offices)
The fourth phase (starting from the end of third stage and up to end of 12/1444H): All types of buildings In addition to the above mentioned buildings.
The first phase will be within the city of Riyadh for a period of six months, starting from the date of the of the Ministry of Municipal and Rural Affairs decree No. 4100393097 dated 06/09/1441 H, and later on will be applied to the rest of the cities of the Kingdom, after coordination with the Saudi Arabian Monetary Agency.
Ten years (calculated using the Gregorian Calendar) commencing on the Date of Inception and expiring at midnight on the Date of Expiry as shown in the Schedule, provided that:
  1. The Occupancy Certificate has been issued.
  2. The premiums due have been paid to Insurer
  3. Insurer has received the Certificate of Approval.
  4. Insurer has issued an endorsement indicating that the Policy is in force.

The Period of Waterproofing coverage is the period commencing 12 months after the Date of Inception and expiring at midnight on the Date of Expiry as shown in the Schedule, provided that:
  1. The Insurer has received a supplementary Certificate of Approval from the Technical Inspection Service for the Waterproofing works.
  2. The additional premiums have been paid to the Insurer if the supplementary Certificate of Approval is not unqualified.

In those cases where the Building Contract provides for more than one Occupancy Certificate:
  1. Inception shall take place in respect of Premises which consist of a single building following issuance of the Occupancy Certificate for the Premises as a whole unless otherwise agreed in writing by the Insurer.
  2. Inception shall take place in respect of Premises which consist of more than one building following the issuance of the Occupancy Certificate for each building unless otherwise agreed in writing by the Insurer.
The Certificate(s) issued by the Technical Inspection Service to the Insurer at the same time as or following practical completion under the Building Contract, and any supplementary certificate issued by the Technical Inspection Service to the Insurer to certify continuing integrity of the Premises in respect of any re-examination in accordance with the Operative Clause.
A permission to occupy the building to be issued by the concerned authority confirming substantial completion of the Premises.
  • The Insured shall pay the deposit premium (as specified in the IDI Insurance Quotation) upon acceptance of the Policy (before the commencement of the works).
  • The Insured is to pay the balance of the expected premium before the issuance of the Occupancy Certificate within 30 days of notification of the insured of the amount due.
  • The final premium is calculated after the completion of construction, the Insured is to provide the Insurer with the final Total Sum Insured (actual cost of the premises construction, which is usually slightly higher than the estimated total sum insured due to additional works, change orders, etc.).
  • Premium adjustment should be done within 90 days from the date of the Practical completion.
The party or parties appointed by the Insurer at the expense of the Insured, to provide such examination of plans, specifications, bills of quantities and other documentation in relation to the Works and such inspections as the Technical Inspection Service and Insurer shall require.
The insured will pay the technical inspectors for their services.
After submitting all the required documents, the technical inspector is allowed to issue a “Certificate of Approval”.
During the constructions, technical inspection is critical stage to get the IDI policy . A completed/ partially completed building does not allow for this opportunity and therefore cannot be covered under this policy.
Neither the Insurer nor the Insured has the right to cancel this Policy during the Period of Insurance except in the following situations:
  1. A paid claim(s) up to the Limit of Indemnity stated in the Policy Schedule where the Insured did not request to apply Reinstatement as explained in the standard IDI policy wording.
  2. Total destruction of the Premises unless caused by an Inherent Defect.
The Insured shall not assign this Policy without the prior written consent of the Insurer and at the same time as any permitted assignment, the Insured shall insofar as they are able to assign to the assignee of the Policy all its rights, title and interest in and to contracts in respect of the supply of materials for, design and construction of the Premises.
All exclusions and related wording are available in the Standard Policy of IDI, However below are list of some exclusions:
  • Alterations of Geological Conditions
  • Capital Appreciation Taxes and Similar Charges
  • Any direct or indirect economic loss, such as loss of enjoyment, use, income, business opportunity, inconvenience, distress or any other indirect or economic loss of any kind or description whatsoever.
  • Any consequential or economic loss or damage of any kind or description whatsoever including but not limited to loss, costs, damages, expenses or penalties as a result of delay.
  • Certificate of Approval Reservation
  • Other Perils (Fire, lightning, explosion, earthquake, storm, tempest, flood, frost, bursting or overflowing of water tanks, pipes or other apparatus, water discharged or leaking from an automatic sprinkler installation, pressure waves caused by aircraft or other aerial devices travelling at sonic or supersonic speeds or the impact of aircraft or other aerial devices or Articles dropped or falling therefrom.)
  • Any fault, defect, error or omission in the design, workmanship, or materials of any of the following: a. Non Structural Works b. Equipment, Fittings and Fixtures. c. External Works.
  • Structural Changes
  • War and other Hostilities / Terrorism
  • Wear and Tear or Discoloration
  • Corrosion
  • Insured’s Professional Advisors or Contractors responsibility
  • Subsidence, heave or landslip unless due to an Inherent Defect.
  • Liability for personal injury or bodily injury
  • Landscaping, including but not limited to vegetation and seeds.
In case of inherent defect discovery, which may give the right to rise a claim under this policy or the occurrence of any damage not covered under this policy but may threaten the stability of the premises, the insured will at their own expense:
  • Notification of claim by the Insured to the Insurer as soon as practicable: Date Claim Made.
  • Take all necessary precautions to prevent any further damage.
  • Provide all reports, certificates, plans, specifications, quantities information and assist as may reasonable be required by the insurer.

  • The Insured shall not be entitled to abandon any property to the Insurer, whether taken possession of by the Insurer or not.