Anyone building a family house sooner or later asks the simple question: what if a storm tears open the half-built house, the roof structure catches fire, or the materials waiting to be installed disappear from the plot? The answer lies on the border of two worlds. One is that of home insurance, which the owner takes out on their own property; the other is that of construction all risks insurance (CAR), which is typically taken out by the contractor for the project. The two do not replace each other, but they complement each other well – if you know what each one is for. As a broker, I see that most private builders believe either that both are taken care of, or that neither is, and the reality lies somewhere in between.
- For a half-built house, Hungarian insurers typically offer home insurance on an “under construction” basis, often only from a certain stage of completion (roof, doors and windows) and with a narrower range of risks – the details vary from insurer to insurer.
- CAR protects the works under construction, the materials and the temporary works, and it also has a liability section; it is typically taken out by the contractor, and the investor can be included as a co-insured.
- Since 15 January 2025, contractors have had compulsory liability insurance (Government Decree 191/2009, Section 21/B) – the policy number is a mandatory element of the construction contract, so it is worth asking for it.
What can home insurance do for a half-built house?
It can be taken out, but not on just any terms. Hungarian insurers typically accept a house under construction separately, on an “under construction” basis, and their acceptance of the risk comes with conditions: in one market example, the condition of acceptance is that construction proceeds lawfully (there is a building permit or a notification) and that the under-construction status is disclosed to the insurer – the cover may then extend to both the installed components of the building and those not yet installed; the completion threshold (for example, the structurally complete state: roof and doors and windows installed) is set differently by different insurers. With other insurers, the stage of completion can be given as a percentage, and a lower stage of completion may mean narrower cover or a different risk classification. Two things, however, typically differ from a contract for a finished house: the range of risks covered (burglary, for example, is included under many policy conditions only once the house can be locked, after the doors and windows are installed) and the sum insured, which grows with the stage of completion. According to the guidance of the MNB (Hungary's central bank and financial supervisor), a significant proportion of home insurance problems stems from an incorrectly chosen – typically too low – sum insured; this is especially true of a house under construction, because the value of the house changes from month to month. It is therefore worth reporting changes in the stage of completion to the insurer and, after completion, converting the contract to the parameters of the finished house or taking out a new one.
What can CAR do – and who should take it out?
CAR works on a different logic: it insures not the property but the project. Section I protects the works under construction – materials, incorporated structures, work performed – and temporary works, existing property and the maintenance period can be added to it; Section II covers damage caused to third parties. I described this structure in the article on cover for the works under construction. Until handover, the risk of the works is typically borne by the contractor under the construction contract and the rules of the Civil Code (Ptk.) on contracts for work, so the CAR policy is usually taken out by the contractor – the investor can be included in the policy as a co-insured, which matters when a claim is paid. I explored which model works better in which situation in the article on who should take out CAR. If you are organising the build yourself, with several small tradespeople and no general contractor, the project has no “owner” who would take out CAR – in that case the under-construction cover of home insurance is the main tool, and some insurers also offer construction all risks-type cover to private builders; this is a market question and varies from insurer to insurer.
What does the contractor bring, and what should you ask for?
Since 15 January 2025, under Section 21/B of Government Decree 191/2009 (IX. 15.), every contractor has been obliged to take out liability insurance, and under Section 12(1a) it may undertake work only if it holds this insurance. The most important checkpoint for you is Section 3(2)(r): the construction contract must contain the policy number of the compulsory contractor's liability insurance and the insurer's name and contact details – or the contractor's declaration that it will hold the insurance by the handover of the construction site at the latest – and under the decree the policy is an annex to the contract if it is available. If neither appears in the draft contract, ask about it. The old, separate insurance system linked to the simplified notification procedure (Government Decree 155/2016) was repealed with effect from 1 October 2024; what replaced it is traced in the article on the compulsory insurances for building a home. What compulsory liability insurance covers: personal injury and property damage caused to a third party – for example, the neighbour – through breach of professional rules and of the contract, together with the grievance award (sérelemdíj). What it does not cover automatically: damage caused to your own existing property (in the case of an extension, the old house). The Public Procurement Authority's 2026 guidance also states that general liability insurance does not extend to damage caused to the contractual partner – in an extension, this gap is filled by the existing property clause of CAR, as I described in the article on existing property. Remedying defects in the contractor's own work, in turn, is a matter of warranty and liability for defects, not an insurance loss.
The two covers together: where is the boundary, where is the gap?
A few typical situations, with answers that depend on the policy conditions:
- A storm tears open the half-built roof: Section I of the contractor's CAR, if the policy is in force and the roof is part of the works; the owner's under-construction home insurance only if its conditions cover that stage of completion and storm damage.
- Materials waiting to be installed disappear from the plot: CAR typically requires guarding or locked storage; home insurance typically does not cover materials stored in the open.
- The neighbour's wall cracks during the foundation work: the contractor's compulsory liability insurance or Section II of CAR – not your home insurance.
- Badly installed insulation that later lets water in: neither insurance – remedying defective performance is the contractor's obligation under its liability for defects.
- Injury to a relative helping out unpaid (kaláka): not a property insurance question but an accident insurance one.
For a house built with a loan, the bank typically requires property insurance already during construction, with itself registered as the pledgee (a loan security clause) – the conditions are set out in the loan agreement.
The house is finished: the moment of switching
CAR ends with the handover – at most the maintenance-period extension continues – and the home insurance has to be switched to the value of the finished house and the complete range of risks. This does not happen by itself: reporting that the house has been taken into use, its completed value and the move-in is your responsibility. The article on switching cover after handover provides a list for this.
What should you do before signing the contract?
Ask the contractor for the policy number of its compulsory liability insurance, and ask whether there is a CAR policy for the project, who is insured under it, what the deductible is, and from when until when it runs. For an extension, ask about the existing property clause. For your own home insurance, clarify from what stage of completion and with what range of risks the insurer accepts the house under construction. If you contact me with these questions, I review the boundaries of the two covers based on the specific contracts – the content of the contract with the contractor, however, remains your decision.
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Sources
- Government Decree 191/2009 (IX. 15.) (Section 3(2)(r), Section 12(1a), Sections 21/B–21/C)
- Netrisk: How can home insurance be taken out for a house under construction?
- K&H home insurance – property under construction (market example of the conditions of risk acceptance)
- MNB Financial Navigator (Pénzügyi Navigátor): Home insurance
- Government Decree 155/2016 (VI. 13.) on the simplified notification of residential building construction (repealed with effect from 1 October 2024)
- Public Procurement Authority (Közbeszerzési Hatóság): Construction insurance – guidance (2026-02-12)
- Fhtv. (Act CLXII of 2009 on credit to consumers) Section 14/A(3)–(4) – insurance required by the lender, acceptance of equivalent cover
- OTP Bank knowledge base – Insurance questions for property loans (bank requirements, mortgagee clauses)
