Demolition Insurance

Demolition insurance is property owner insurance that covers the costs of demolishing a building damaged by a peril such as fire or storm. Building codes or zoning regulations may require that a damaged structure be demolished rather than repaired. It may even be less expensive to do so.

Demolition insurance protects the property owner in these cases. The cost of tearing down undamaged portions of a damaged structure is also covered by demolition insurance.

Demolition insurance is also referred to as contractor insurance, which covers bodily harm or property damage during the demolition process.

Understanding Demolition Insurance

Catastrophe insurance will pay for an insured's losses caused by a natural disaster, such as a hurricane or fire. If a disaster renders a structure incapable of repair and thus must be demolished, demolition insurance will cover the cost of demolition for the property owner.

Property owners should also check their insurance policies for a debris removal provision that covers the cost of removing debris and pollution caused by demolition.

Contractors are hired to demolish a structure during the demolition process. Demolition is a dangerous process, so contractors obtain demolition insurance to protect their employees from on-the-job injuries, any nearby civilians who were injured by the demolition, or if they damage a part of the property that was not going to be demolished.

Depending on the policy, much of this type of insurance can be covered under workers' compensation and commercial general liability insurance.

Welding, blasting, and piling contractors are the most common types of contractors who require demolition insurance.

Homeowners Insurance and Demolition Insurance

Depending on the state and policy type, a typical homeowners policy may or may not cover demolition and debris removal. 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 is covered by HO-1, one of the most common policies.

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 are all covered under HO-2.

Some policies cover demolition, but only up to a certain percentage of the rebuilding cost. So, if you have $100,000 in damage coverage and 25% demolition coverage, you'd get $25,000 less whatever your deductible is.

Debris damage works in the same way, but it becomes more complicated if, for example, a windstorm knocks down a bunch of trees and tears up your yard. The same 25% would apply, but only to the total cost of the claim, which could very well be primarily the debris removal. In this case, you will be short of what you require to restore your property to pre-storm condition.

Furthermore, some policies include an "additional coverage" section that may add a lump sum of $10,000 to any debris removal or demolition coverage.

Most people who purchase homeowners insurance do not read the policy. Only when a claim is filed do you begin to consider what is truly covered and for how much. If your coverage is limited, this can be costly.