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Introduction: Understanding Construction-Stage Property Insurance for Foreigners
Turkey’s real estate sector is one of the most dynamic in Europe, drawing thousands of foreign investors each year. Many foreigners purchase properties that are still under construction, whether as residential investments, vacation homes, or commercial projects.
However, few are aware that these partially built properties can — and should — be insured.
Under Turkish law, both individuals and corporations can insure a property during its construction phase to protect against unforeseen damages, natural disasters, or contractor negligence.
This form of protection, known as construction all-risk insurance (inşaat tüm risk sigortası), is especially vital in Turkey due to the country’s exposure to earthquakes, floods, and construction-related accidents.
Foreign investors, though unfamiliar with Turkish insurance procedures, enjoy the same rights as Turkish citizens to obtain and enforce such coverage.
Still, understanding how to navigate the local legal framework, insurer requirements, and documentation procedures can be challenging — making professional legal and technical guidance essential.
1. Legal Framework Governing Property Insurance During Construction
The ability to insure a building still under construction stems from Law No. 5684 on Insurance, the Turkish Commercial Code (TCC), and the Turkish Code of Obligations (TCO).
These laws collectively ensure that insurance contracts may cover future or potential risks, not just existing property.
Article 1401 of the TCC specifically allows insurance for any insurable interest, meaning that ownership need not yet be finalized — what matters is the insurable economic interest of the policyholder.
For foreigners, this means that even if the property is not yet registered in their name at the Land Registry Office (Tapu Müdürlüğü), they can still insure it if they have a legal or contractual interest — for instance, through a preliminary sales contract (ön satış sözleşmesi).
FAQ
Is it legal to insure property before construction is complete?
Yes, Turkish law explicitly permits insurance for buildings under construction.
Do you need title deed ownership?
No, a documented economic or contractual interest is sufficient.
Which laws regulate such insurance?
The Turkish Commercial Code and Law No. 5684 on Insurance.
2. Types of Insurance Policies Available for Under-Construction Property
There are several forms of coverage foreigners can obtain depending on the project’s stage and risk profile:
- Construction All-Risk (CAR) Insurance: Covers physical damage to the building, materials, and machinery during construction.
- Third-Party Liability Insurance: Protects against damage or injury to third parties caused during construction.
- Employer’s Liability Insurance: Covers injuries to workers or contractors.
- Professional Indemnity Insurance: Protects architects, engineers, or project managers from professional negligence claims.
- Fire and Natural Disaster Coverage: Extends protection to materials and semi-finished structures.
Each policy can be tailored based on the investor’s role — whether as project owner, contractor, or financial stakeholder.
FAQ
Can foreigners purchase CAR insurance directly?
Yes, either individually or through their Turkish construction contractor.
Is earthquake coverage included?
Usually, yes, but check for specific DASK earthquake endorsement clauses.
Can coverage extend to materials imported from abroad?
Yes, provided they are declared in the policy schedule.
3. Who Can Purchase Construction Insurance in Turkey
Turkish law allows any person or entity with a financial interest in a property to insure it.
This includes:
- Foreign individuals who have signed a preliminary sale or investment contract,
- Developers or project partners registered abroad,
- International construction companies operating in Turkey,
- Foreign funds financing real estate development.
The insurer will typically require documentation proving involvement in the project — such as contracts, payment receipts, or investment declarations.
Foreign investors can either take out the policy themselves or request the developer to do so, naming them as co-insured.
FAQ
Can non-residents insure a Turkish property?
Yes, residence in Turkey is not required.
Can more than one party insure the same property?
Yes, as co-insureds, provided each has an insurable interest.
Do developers have to include the foreign buyer in their policy?
If stipulated in the sales agreement, yes.
4. The Importance of “Insurable Interest”
The concept of insurable interest is crucial. It ensures that the insured party has a legitimate financial stake in the outcome of the risk.
For example, a foreign buyer who has paid 30% of the purchase price under a notarized preliminary contract is entitled to insure the unfinished apartment against construction accidents or natural disasters.
Without insurable interest, the policy may be invalid. Thus, contracts and payments must be properly documented and ideally notarized.
FAQ
Can you insure property you do not yet own?
Yes, as long as you can prove a financial interest.
Does a notarized contract strengthen your claim?
Absolutely — it provides clear legal standing.
Can insurance cover losses to expected profit?
Yes, if included as a business interruption extension.
5. The Role of the Developer and Construction Company
In most Turkish real estate developments, the construction company (yüklenici) or developer (müteahhit) takes out insurance to protect the project and its investors.
However, foreigners should not assume they are automatically included in this policy. Unless they are explicitly listed as beneficiaries or co-insureds, they may have no rights to compensation.
Therefore, foreign buyers should always request a copy of the insurance policy and verify whether their name or contract is covered.
If not, they should purchase supplementary insurance individually.
FAQ
Are developers legally required to insure projects?
Yes, for certain permits and financing, insurance is mandatory.
Are foreign buyers automatically included?
Not necessarily — only if named in the policy.
Should foreigners request policy copies before payment?
Yes, to confirm coverage and terms.
6. Risks Covered During Construction
Typical construction insurance in Turkey covers a wide range of risks, including:
- Fire, explosion, and lightning,
- Earthquake, flood, storm, and landslide,
- Theft or vandalism,
- Human error or machinery failure,
- Accidental collapse or design faults,
- Damage during material transport.
Optional add-ons may include loss of profit, delayed completion, and extra expense coverage.
Foreign investors should review the exclusions section carefully, as Turkish insurers may exclude losses from design defects or poor workmanship unless specifically included.
FAQ
Does standard coverage include earthquakes?
Yes, but only if specifically endorsed in the policy.
Are design errors covered?
Not automatically — they must be added as extensions.
Can weather delays be insured?
Yes, under delay-in-start-up (DSU) clauses.
7. The Role of DASK (Compulsory Earthquake Insurance)
All buildings in Turkey must have DASK (Doğal Afet Sigortaları Kurumu) earthquake insurance once construction reaches a registered stage.
However, during early construction, private insurers offer temporary earthquake coverage until DASK registration becomes applicable.
Foreigners must ensure that the property transitions from private coverage to DASK coverage seamlessly once a title deed (tapu) is issued.
FAQ
Is DASK available during early construction?
No, only once the building has a registered structure.
Can foreigners hold DASK policies?
Yes, both residents and non-residents can.
Do private policies fill the gap before DASK?
Yes, through temporary earthquake coverage.
8. Premiums, Valuation, and Payment Methods
Insurance premiums depend on construction value, duration, and risk exposure.
Foreign investors often pay through international bank transfers or via local insurance brokers authorized to issue policies in foreign languages.
Insurers typically require:
- Construction contract or cost estimate,
- Project timeline,
- Material inventory,
- Site address and layout plans.
Premiums can be paid in Turkish Lira or foreign currency, depending on insurer approval.
FAQ
Can foreigners pay premiums from abroad?
Yes, most insurers accept international transfers.
Are payments tax-deductible?
Yes, if linked to business investment activity.
Can policies be issued in English?
Yes, bilingual policies are common for international clients.
9. Claim Procedures for Foreign Insureds
If a loss occurs, the insured must notify the insurer within five working days and submit documents proving ownership or contractual interest.
The insurer then appoints a licensed expert (eksper) to assess damage and prepare a report.
For foreigners, working with a local lawyer ensures the process runs smoothly — from translation to communication with the insurer and experts.
Once the report is finalized, the insurer must pay the indemnity within ten business days under the Turkish Commercial Code Article 1427.
FAQ
What if the insurer delays payment?
You can claim default interest or file a bad-faith claim.
Can foreign claimants attend inspections remotely?
Yes, via proxy or video conference.
Is mediation mandatory before court?
Yes, in commercial insurance disputes.
10. Dispute Resolution: Courts, Mediation, and Arbitration
Insurance disputes in Turkey follow a multi-step process:
- Mediation: Mandatory before litigation.
- Insurance Arbitration Commission: Quicker, expert-driven decisions.
- Commercial Courts: For complex or high-value disputes.
Foreign claimants can choose between arbitration and court depending on their policy clauses.
All judgments and arbitration decisions are enforceable under Turkish law and, if necessary, through international recognition treaties.
FAQ
Can foreigners file cases in Turkish courts?
Yes, regardless of residence or nationality.
Are arbitration decisions enforceable abroad?
Yes, under the New York Convention.
How long does litigation take?
Between 12 and 24 months, depending on complexity.
11. Tax and Legal Considerations for Foreign Buyers
Premiums for property under construction are subject to Turkish insurance transaction tax (BSMV).
Foreigners investing through companies may deduct premiums as business expenses.
Additionally, Law No. 2644 on Land Registry allows foreign nationals to own and insure real estate in designated zones without restrictions.
Foreign investors must ensure compliance with Turkish banking, tax, and residency regulations when paying premiums or receiving indemnities.
FAQ
Do foreigners pay extra taxes on insurance?
No, standard BSMV rates apply equally.
Can insurance proceeds be transferred abroad?
Yes, once tax obligations are fulfilled.
Is residency required to receive payments?
No, payments can be made to foreign accounts.
12. Insurance Requirements for Construction Permits and Mortgages
In many Turkish municipalities, construction projects require proof of insurance to obtain building permits or financing.
Banks and lenders often demand a construction all-risk policy before releasing funds.
Foreign investors financing construction through Turkish banks must present valid insurance certificates showing coverage for structural and liability risks.
FAQ
Is insurance mandatory for building permits?
Yes, in most major cities like Istanbul, Ankara, and Izmir.
Do banks require insurance for construction loans?
Yes, as a standard condition for approval.
Can foreigners use foreign insurers for Turkish projects?
Only if authorized locally or partnered with a Turkish insurer.
13. Common Mistakes Foreign Investors Make
- Assuming the developer’s insurance covers them,
- Failing to translate and review policy terms,
- Missing premium deadlines,
- Ignoring the need for separate earthquake coverage,
- Not appointing a local representative for claims.
Such mistakes can jeopardize compensation rights. Legal review before policy purchase prevents disputes later.
FAQ
Is a lawyer necessary to review policies?
Strongly recommended for accuracy and enforceability.
Can one policy cover multiple properties?
Yes, through umbrella construction insurance.
What if the developer goes bankrupt?
Your personal insurance remains valid for your investment portion.
14. Yargıtay (Supreme Court) Precedents on Construction Insurance
The Turkish Supreme Court (Yargıtay) has issued several rulings protecting policyholders’ rights in construction insurance.
In Yargıtay 11th Civil Chamber, 2020/1421 E., 2021/1734 K., the Court held that insurers could not deny payment for damages during construction unless the excluded risk was clearly defined.
Another ruling emphasized that the insured’s contractual interest was sufficient to claim compensation, even before ownership transfer.
These precedents offer strong legal protection for foreign investors facing insurer denials.
FAQ
Do Yargıtay decisions apply to foreigners?
Yes, Turkish law guarantees equal treatment.
Can foreigners cite these rulings in court?
Absolutely, as binding precedent.
Have courts favored developers over buyers?
Not when buyers had documented contractual interest.
15. Conclusion: Why Foreigners Should Insure Properties Under Construction
For foreigners investing in Turkish real estate, insuring a property under construction is not only legal — it is essential.
Construction insurance shields investors from financial loss caused by unforeseen disasters, delays, or contractor negligence.
Turkish law provides a robust framework that welcomes foreign policyholders, ensuring they receive equal treatment under both domestic and international law.
With the right guidance, bilingual documentation, and a trusted Turkish lawyer, foreigners can protect their construction investments fully and confidently — turning risk into secure opportunity.
Call to Action (CTA)
If you are a foreigner investing in property under construction in Turkey and wish to protect your assets through proper insurance coverage, professional legal guidance is essential.
At Fırat Fesih Kaya Law Firm, we specialize in real estate, insurance, and construction law, offering comprehensive legal support for foreign investors from contract drafting to claims and dispute resolution.
Ensure your property and investment are secure under Turkish law — contact us today for expert advice and personalized solutions.
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