Building insurance and natural disasters

Author: Bernhard Bircher-Suits, FundCom AG

‘For homeowners, the priority is to insure against risks of an elementary nature, such as fire, flooding and storms – in other words, risks that pose a threat to a person’s financial existence.’ So says Professor Hato Schmeiser from the Institute of Insurance Economics at the University of St. Gallen. One thing is clear: damage caused by natural hazards can quickly cause losses to your home in the order of several hundred thousand francs.

Maximum damage from hail, flooding and storms

And damage to real estate caused by the violence of nature is on the rise: in 2023, building insurance providers in Switzerland recorded an increase in damage caused by natural hazards. According to the umbrella organisation for cantonal building insurance, total annual losses amounted to CHF 342 million, around one third (27%) more than the average of the last 10 years. The highest proportion of damage between 2004 and 2023 was caused by hail (41%), flooding (36%) and storms (19%).

The most important type of insurance for homeowners

As a result, building insurance is probably the most important type insurance for building owners in Switzerland. This covers the costs of damage to the building caused by fire and natural hazards. It insures the building itself and its structural fixtures, such as bathtubs, doors and fittings. But watch out: movable items like beds, sofas or dining tables are usually not covered by building insurance. 

What damage is covered by building insurance?

Building insurance covers the following damage:

• Fire, smoke, heat (as a result of a blaze, etc.)
• Lightning strike, explosion
• Storm damage (storm or tornado with winds of at least 75 km/h)
• Hail damage
• Water damage as a result of flooding
• Snow pressure, falling snow, avalanches
• Falling rocks
• Landslides or rockslides
• Falling aircraft or spacecraft

Tip: It’s worth reading the details of the cover and the fine print of the building insurance policy carefully. 

What damage is not covered by building insurance?

Damage that is not the result of natural events is generally not covered by building insurance. Among other things, this includes:

• Earthquakes
• Subsidence, earth movements
• Poor construction
• Ground, melt or rainwater than enters the house
• Backwater from the sewer system
• Broken water pipes
• Nuclear accidents
• Pandemics
• War, domestic unrest

Tip: Gaps in building insurance can often be covered by supplementary policies, e.g. for rental income, glazing, structural equipment, third-party liability or accidental damage. Building services insurance protects against damage to heating, solar panels and household appliances caused by operating errors or overvoltage. Environmental insurance covers damage on your land such as storm breakage or damage to wild animals.

Remember: Grossly negligent action may result in the exclusion of insurance protection. You are obliged to do everything you can to limit the damage as much as possible. This includes, for example, removing computer and TV cords from outlets when you go on holiday, or storing movable objects such as bicycles and garden furniture securely.

Does building insurance cover all water damage?

No, building insurance only covers damage caused by flooding. For other causes of damage, such as a broken pipe, a leaking roof or a leaking bathtub, supplementary insurance is required, known as water damage insurance. It is optional, but particularly advisable for buildings with old sewage pipes.

Is building insurance compulsory?

With the exception of the cantons of Geneva, Ticino, Valais and the inner part of Appenzell Innerrhoden, building insurance is compulsory in Switzerland. Even in places where building insurance is not compulsory, insurance experts strongly recommend it. A helpful hint: in the cantons of Uri, Schwyz and Obwalden, private insurance can be taken out instead of the cantonal building insurance.

How much will an annual premium for building insurance cost me?

Premiums for building insurance in Switzerland depend on the canton, building insurance value and provider. In cantons with compulsory cantonal insurance, this is usually cheaper than from a private provider. For a solid construction house with a reinstatement cost of CHF 800,000, the premiums will be between CHF 260 and CHF 570 for cantonal insurance, and between CHF 340 and CHF 800 for private insurance. 

Do you need your own building insurance for a condominium?

As an individual condominium owner, you generally don’t need your own building insurance. However, it is a good idea to take out household insurance. Generally, the management or the condominium owners’ association concludes a joint building insurance policy for the entire building in which the condominiums are located. It is therefore organised and financed by the condominium owners’ association. The premiums for this are included in the contribution to community costs (often referred to as ‘ancillary costs’).

Earthquakes: do I really need to insure against this risk?

Earthquake insurance is only included in building insurance in the canton of Zurich because this is stipulated by the canton. In the rest of Switzerland, basic building insurance does not cover damage to buildings caused by earthquakes. According to the Association of Cantonal Building Insurance Providers (VKG), around 85 % of Swiss building owners are inadequately protected against earthquakes. Voluntary supplementary private insurance against earthquake damage is a good idea, particularly in regions with a high seismic risk (see ‘Earthquake zones in Switzerland’). 

Glass breakage: who pays when it cracks or shatters?

Supplementary glazing insurance covers breakage of window panes, glass doors, toilets, washbasins, glass ceramic cookers and kitchen covers made of natural stone. The insurance can be included in your household insurance – or you can take out a supplement to your building insurance.

Tip: Review both your building insurance and your household insurance to see what level of glass breakage is covered. If necessary, it may be worth concluding additional insurance against this risk.

How does the building insurance provider calculate the insured sum?

Of course, if you are hit by a natural disaster and your house is damaged, you want the insurance company to pay enough money to repair and restore everything to its original condition. For this reason, in building insurance buildings are often covered for their replacement value. 

In other words, an estimate is made of the cost to restore the building to the same condition and size if it is damaged. This estimate is repeated every 12 to 15 years. These periodic estimates serve to keep the insured value up to date and prevent underinsurance. If the building is old, it may also be insured at its fair value, which means the current value of the building must be determined.

In summary: Prevention is better than cure: keep your house well maintained, make sure windows and doors are well sealed and remove risky trees next to your building. Sensitive technology such as electricity meters or washing machines should be raised or not located in the basement at all, and heating oil tanks must be secured. A warning system such as Alertswiss informs you free of charge about impending storms via an app.