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Factoring renovations insurance into your budget is a must if you're planning renovations work in your home, whether you've just purchased it or been living in it for a while. However, it can be difficult to work out when it's needed, especially for first-time homeowners.
With this in mind, experienced renovator Michael Holmes offers advice on renovations insurance and how it will impact the process of costing a renovation.
Unless you intend on moving into the property straight away, you will need to arrange either empty buildings insurance or site insurance to protect the building against damage and to provide public liability cover. It's worth noting that conventional buildings insurance will not be valid (and claims may not be paid out) if a property stands empty for more than 30 days, or is not hospitable.
Some insurers will extend empty buildings cover if notified, but this may only provide insurance for basic risks, such as fire, lightning, earthquake, explosion, and impact by aircraft.
Empty buildings cover is typically dependent upon:
Insurers will also usually require:
There can be a lot of confusion around when you need renovations insurance if you're not renovating the whole house. Do you really need it if you're only redoing the bathroom, for example?
The answer is: you do if 1) there will be structural changes made to the property, even if it's just knocking through a wall, and 2) the extent of the renovations works is such that you will be required to vacate the property for the duration. For example, if you're completely re-plumbing and replacing your bathroom, you won't be able to use it, hence you'll need renovations insurance. Other examples of works that need this type of insurance include:
You won't need renovations insurance for cosmetic work such as repainting or replacing cabinets/a bath.
The alternative of site insurance is likely to prove more cost-effective for a project that is to be renovated or converted. Cover from specialists should include all risks to the building plus public and employer’s liability. Cover should be taken out for the duration of the build, starting from the moment you purchase the property – or if it is your current home, the day you move out.
This will depend on the retained property’s rebuild value, postcode risk (according to the local area’s claims records), the value of the new building works, and the term of the insurance.
So long as the contractor has a valid contractor's all risks insurance policy, with a limit that meets or exceeds the full rebuilding cost of the project, there is a written contract between both parties stating that they are responsible for the whole project to the point of handing you the keys to a completed property, you should be okay. However, if that contractor is building the shell and you are taking over from there, you will have no cover when they have left the site.
If your home improvement project simply involves decorating or adding a new bathroom or kitchen, you will not need to tell your insurer, although you should increase your level of cover if the rebuilding cost is increased.
If you are undertaking large-scale renovation work or an extension that could increase the risk of damage to the building or contents – for instance, exposing the property to the elements – you should inform your insurer, as most home policies exclude alteration and renovation as standard. Failure to do so could lead to your policy being canceled and any claims declined.
Those insurers that will extend some cover may exclude key risks, such as collapse during the knock-through between the existing house and new extension. Bear in mind that the work in progress is unlikely to be covered, so you need to ensure this is included in your contractor’s all-risk insurance, or else arrange your own separate cover. Once the work is completed, you must remember to increase the level of buildings cover to reflect the new rebuild cost.
Expect to pay a small additional premium on top of your existing buildings and contents policy.
If you’re not using a main contractor with sufficient contractor’s all-risk insurance to cover the whole project – for instance, because you have opted to use subcontracted labour and/or DIY, or a builder for only part of the works – then you must arrange your own cover. Look for an all-risks policy for extensions, home improvements, or renovations that provides the following level of cover:
The premium will depend on the postcode area, who is undertaking the works, and the nature and valuation of the works.
Joint Contracts Tribunal (JCT) Clause 6.5.1 Insurance, also known as party wall insurance, protects against liability for damage to nearby properties resulting from works undertaken by your contractor or subcontractors.
Public liability insurance (see below) will protect against claims where damage has resulted from negligence, but JCT Clause 6.5.1 will protect you and your builders against claims for damage to third party property where it cannot be proven it has not been caused by the negligence of the contractor or subcontractors – such as collapse, subsidence or heave, vibration, weakening or removal of support. This means that the damage has not been sudden, identifiable and unexpected, but has occurred over a longer period of time as a result of the works.
The premium will be a single payment, based on the level or risk calculated according to the postcode area, the nature of the works and the contract value.
Public liability insurance is one of the first kinds of protection you should obtain when renovating your property because it will ensure that you won’t be solely responsible for injuries to builders and contractors. This kind of coverage also protects against damage to their property caused by your renovation proceedings.
Most importantly, public liability coverage will also protect any contractors you have hired to carry out your renovation. This is an important stipulation to present to potential construction companies so that they can renovate your house with peace of mind. In fact, many contractors will require it before they even step foot on your property to work.
In the case of an accident, public liability insurance covers legal fees, medical bills and repair costs to damaged property. This means that you won’t have to worry about shutting down your renovation due to insufficient funds, so the insurance is beneficial to all parties involved.
Property owner’s liability coverage works in the same way that public liability insurance does for guests and visitors, whether they are invited or unwanted. Part of completing a renovation includes opening up your property to inspectors and other officials who will grant you certification, and property owner’s liability insurance is designed for them. Also, if your property does not yet have walls or doors, it could be vulnerable to trespassers who could actually sue you if they get hurt.
The first-time conversion of, for example, a barn, church, office, or school or the renovation of a dwelling empty for 10 years or more, will need empty buildings insurance in place immediately after the exchange of contracts. Where permission for residential conversion has been granted on an exception to the normal policy preventing new dwellings in open countryside, specialist insurance is required, as a total loss of the building could invalidate the planning permission.
Once work starts, specialist insurance covering the value of both the existing building and new works, combined with contractor’s all-risk insurance, is needed. You should also take out a guarantee for ongoing protection.
The premium will be calculated according to the rebuild value of the existing retained structure and the building works, and the risk level (assessed by postcode area and security of the site). Cover is typically for 12 months.
Restrictive covenants put in place by former owners of a piece of land can control its future use for the benefit of nearby landowners and can be worded so that the benefits pass on to future owners. Checking the title deeds to your property (available from your solicitor or HM Land Registry) will reveal whether there is a valid restrictive covenant that could prevent you from developing your property.
If a covenant exists, you should first see whether indemnity insurance is available to provide you with protection in the event that a beneficiary of the covenant takes legal action against you for being in breach. Do not contact the beneficiary before speaking to an insurer.
Specialist insurers will assess the covenant’s enforceability, the likelihood of the beneficiaries coming forward, and the extent of possible damages and set the premium – a one-off payment – accordingly.
If your home is flooded in a storm – then your home insurance pays for it. But if that flooding is deemed to be caused by the roof collapsing because it was not correctly braced when built, that is classed as defective workmanship and would be excluded by the home insurer. They would simply suggest you sue the builder, which in raw terms is you. This is why structural warranty is so important on self-build properties.
The warranty provider checks the design of the build and the construction using a series of technical audits to make sure there is no defective workmanship or materials. Defects identified along the way have to be remedied prior to issuing cover.
A warranty provider can often facilitate the handling of the building regulations plan check and site inspections by an approved inspector so you don’t have to use the local authority. You can normally save money following this route because if you do decide to use the local authority, the warranty provider still has to do warranty inspections alongside the local authority so you effectively get charged twice for the same thing. Arrange the warranty early on. Basically, the premiums escalate the further through the project you leave it.
It’s possible to cover completed properties on a structural warranty retrospectively which can be useful if you didn’t get a warranty in place at the start of the build as it enables a prospective purchaser to raise a mortgage on the property. A completed warranty is an expensive option when compared to purchasing it at the start of your project.
A future buyer of your home will expect to see copies of the planning permission and building regulations certificates for any work that has been undertaken under your ownership and will be further reassured if the work is covered by a transferable insurance-backed warranty. This may apply to new windows, a new roof, energy-efficiency features or a whole extension or renovation project. The main warranty providers include:
Federation of Master Builders: The FMB offers a warranty scheme via its members, which provides similar cover to a new home warranty, including:
National House Building Council: NHBC offers a 10-year Buildmark cover for converted and renovated homes via registered contractors. This provides the following cover:
Home Improvements Guarantee: HIG offers an insurance-backed guarantee for work undertaken by its network of vetted and approved contractors for a period of up to 10 years.
HomePro: Deposit and payment protection plus an insurance-backed guarantee for varied home-improvement projects via a network of 3,500 tradespeople across the UK.
BondPay: A payment protection service that holds your money in a secure account with payment made only once work is completed – either in whole for smaller jobs or to agreed stages for large projects.
The premium for taking out a warranty will depend on the level of risk (the contractor’s rating based on their experience and claims history) and the value of the contract. You must request that cover is put in place and ask for a registration certificate.
2020-04-28 13:25:02
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