What is construction completion insurance?
Construction completion insurance (bina tamamlama sigortası) is a protection mechanism for housing buyers. It addresses the risk that a contractor becomes insolvent, abandons the site or fails to deliver on time — by providing for completion of the project or refund of advance payments. Under Law No. 6306 on Urban Transformation (Kentsel Dönüşüm Kanunu), this cover has become mandatory for a significant category of projects carried out within urban transformation schemes in Turkey.
How does it work?
The contractor obtains the policy before the project is offered for sale. If the project cannot be completed:
- Insurer steps in: if the contractor defaults, the project is either completed by an alternative contractor or the buyers receive a refund of their advance payments
- Alternative contractor: an alternative contractor is found to complete the project
- Advance refund: where completion cannot be arranged, the amounts paid by buyers — advance payments and instalments — are refunded, up to the policy limit
Coverage scope
- Contractor insolvency or concordat: covers the scenario most buyers fear — the developer entering bankruptcy or concordat mid-project
- Site abandonment: covers situations where the contractor walks away without formal insolvency proceedings
- Failure to deliver on time: where the contractor fails to complete by the contractually agreed date, cover may be triggered under applicable policy forms
- Licence revocation: if the construction licence is withdrawn, coverage may apply
- Advance payment refund: amounts paid by buyers — advance payments and instalments — are refunded if the project cannot be completed
Advantages for contractors
- Competitive differentiator: a completion-insured project is a strong trust factor for buyers
- Bank finance: holding a completion insurance policy can facilitate banks' lending processes
- Market positioning: a completion-insured project distinguishes the contractor in a competitive market and strengthens buyer confidence
What to check when buying a policy
- Policy limit: ensure the limit is appropriate for the total sales value of the project
- Deductible: understand what portion of completion costs remains with the policyholder before the insurer pays
- Policy period: the policy must cover both the construction period and the occupancy permit phase
- Exclusions: review under what circumstances coverage may be suspended or excluded under your policy terms
Under Law No. 6306 on Urban Transformation, completion insurance is mandatory for qualifying urban renewal projects. For any developer managing buyer deposits, it is also a prudent commercial safeguard.
At Neolife, we manage both the policy process for contractor firms and the coverage assessment for buyers. Review our construction and erection insurance solutions and schedule a meeting for the right coverage structure for your project.