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Building Work, Renovations and Extensions Insurance

It is common in these days of high property prices to extend your existing home rather than go through the expensive process of moving house. With no stamp duty or moving costs to worry about, extensions are a good way to size-up without the hassle of uprooting the family. 

Alternatively, you might decide to size up by buying a property to renovate. Though not everyone’s cup of tea, it is still possible to find a potential bargain that with some imaginative renovation could become your dream home. 

Renovations insurance 

Whether your home renovation is a relatively straightforward loft extension or a total redesign of the house with walls and ceilings being ripped out, this will be classed as major building work so you will need to notify your insurance company  

You could be invalidating your buildings insurance policy if you don’t let your insurer know about the changes. 

Cosmetic changes are fine – but once you start knocking down walls, ripping out plumbing and rewiring a whole house, you are talking about major works and you need to make sure you are adequately covered. 

And it is important you tell your insurance company before the first brick is knocked out or roof tile is lifted.  

Building challenges with home renovations

Home renovations can be more complex than you initially think. There are multiple problems that might arise – for instance your home may be exposed to the elements and because of doors/walls being taken out more vulnerable to theft or vandalism. The building could become structurally unstable and you also have the added issue of various contractors coming and going at different times and not always being clear where responsibility and delegation lies. 

You may well need to take out specialist home renovation insurance – though check your existing buildings insurance to see what cover you already have in place.

Specialist home renovation insurance can provide unoccupied property cover on the basis that you are not living in the house for 30 days or more. Public liability insurance will provide cover in the event of someone being injured while working at your property. 

Home renovation insurance might also include alternative accommodation insurance. This means  if you need to live elsewhere due to damage caused by building works – for instance cracked pipes resulting in no running water – the insurer will pay for you to live elsewhere until your home is habitable again.  

If you are working on the project yourself, (maybe in addition to a local builder) and you have hired or bought building tools and materials, this should also be included in your home renovation insurance. 

Building work insurance

Most contractors will have insurance for the works carried out on your home. While this might provide some reassurance, it might not protect you in all events. Your builder’s insurance policy might limit levels of cover and have various exclusions that you are unaware of. 

For example, damage to your existing building could be excluded from the contractor’s liability clause or application of heat – for instance using a blowtorch or grinder - might not be covered. 

Let’s imagine a fire broke out as a result of the building works, burning your extension down. ‘Application of heat’ was excluded from the contractor’s insurance policy for the buildings work on your extension and this was identified as the cause of the fire. In this worst-case scenario you would be left with no extension and facing the prospect of suing the contractor or paying for the works once again. None of this was your fault but it could cost you dearly. 

Renovation and extension insurance policies give you cover for your existing building, your contents, the works being carried out and all materials while the project is in progress. It provides cover against the increased risks associated with a high value building work – essentially it protects your biggest asset - your home. 

Talk to your builder about insurance levels

Before you even start a building project, ideally at the tender selection process, ask for details of a builder’s insurance policy. You will be able to check they are up to date, their cover limits and that the sums insured are sufficient for your specific building project. 

The basic level of insurance you should look for from your building contractor should include:

  • Employers’ Liability: This means the main contractor is responsible for the welfare, any injury, loss or death to any of the employees on site 

  • Public Liability: Damage, this covers any loss or injury suffered by a member of the public or third party. For example, if scaffolding falls and injures a passer-by, the contractor is liable 

  • Contract Works Insurance or Contractor’s All Risk (CAR): offers all risk cover for events such as flood and storm damage, fire, theft, vandalism. CAR is not mandatory so builders might have reduced what is covered, to reduce their premium. Check what risks are insured and where, if at all, there are gaps

Notifying your insurer about building works 

We mentioned earlier about notifying your insurer from the start about planned building or renovation work. The level and accuracy of detail you provide your insurer is important and could avoid awkward and expensive wrangling further down the line. 

You should provide your insurer with details of what is proposed, realistic cost, likely duration of the projects, related risks and other factors such as the property being in an exposed location or being situated next to high-risk premises – for instance  buildings incorporating large amounts of exposed untreated timber or lined with combustible cladding.

Calculating renovation costs for your insurer

Calculating (or estimating) the costs of the works is not always easy. With many building projects, final costs prove significantly more than expected at the outset. It is advisable to give yourself some leeway if you can. 

In terms of how long the building will last, in most cases major works take longer than planned. It is probably about right to add 20% more time to the timeframe forecasted at the outset.

All this information that you pass to your insurer is important as it reduces the risk of the insurance company trying to wriggle out of or reduce a claim on the basis of ‘non-disclosure’. This means they maintain that an issue critical to them assessing risk was not disclosed by you at the beginning of the building project. This could potentially invalidate the policy.

In addition to costs of the building works, it is a good idea to make sure you provide your insurer with an up-to-date rebuild value of your existing property (i.e pre-building extension). If the worst-case scenario happens and the whole property is burned down or destroyed, you will not be underinsured. 

If the rebuild value needs to be updated, this might mean an increase in premium on your existing buildings insurance policy, but it is better to have appropriate cover. 

You might also want to pay for an insurance-backed warranty or guarantee. Your building contractor may offer you one as part of the cost of the work. Once again, check what is covered and the cost of the guarantee. These warranties are designed to cover the cost of finishing or putting right the work if the contractor does a sub-standard job or goes out of business.

The perils of buildings insurance for DIY projects

If you're going to be getting the toolbox out yourself, be aware that DIY is a notoriously contentious issue for home insurance claims.

For small jobs, you won’t have to let your insurer know, but if it’s a bigger project, it’s worth getting in touch.

If you have accidental damage cover with your home insurance policy, you may well be covered for minor mishaps like drilling through a pipe, or a cracked sink, or broken window caused by attempted home improvements. Check your policy to see what minor damage is included. 

However, if you botch a massive DIY project that you're not qualified to be carrying out yourself, you will most likely have to pay out of your own pocket to put things right.

Any major damage like blowing the electrics in your own house, or disasters as a result of DIY plumbing or gas installation will not be covered.  Only a registered professional can carry out this work safely and issue the required certificates. 

While you might think a job is easy and that going down the DIY route will save you money, if anything goes wrong you are unprotected and the financial consequences could be huge. 

Even if the work you carry out is entirely functional, the fact that you have no certification for electrics, gas, plumbing etc could actually lower the value of the house if you decide to sell. Ugly DIY garage conversions and building extensions might increase the footprint of your property but also reduce the value of your home – especially if the right planning permission has not been sought. 

As a homeowner you would do well to honestly appraise whether you have the necessary skills to carry out major renovation work. Whatever work you do undertake or whatever parts you wisely contract out to qualified tradespeople, you need to be insured properly.

28 October 2020