Insurance when building or renovating your home…

It is generally known that insurance is a good idea when undertaking a building project such as having your home built or renovated. The normal insurance is provided by the builder in case their actions cause damage to the contract works or the property of others. However, there are several types of insurance and you should consider what cover you need to be fully protected. Leaving a gap in your insurances can prove extremely expensive.

The insurance the builder takes out for contract works will not cover their poor workmanship. It will also not cover them going bust during the build (leaving you to have to find a replacement builder and out of pocket for money already paid to the builder etc).

To cover those sorts of risks you need a building guarantee type policy. If your builder is a member of Master Builders then they offer this type of guarantee insurance. It is a separate policy that you need to arrange and pay for before building work commences and before you pay over any deposit. We have seen many cases of deposits being handed over and then the builder going bust before any work at all is done. If the guarantee insurance is not already in place, then the homeowner has missed out on getting their deposit back. If your builder is not a Master Builder, then you can obtain this type of cover from other insurers.

Also important to arrange is cover for your existing property during the build. Many existing house insurance policies have exclusions that mean they do not cover damage during construction work. An often seen exclusion of cover is when the roof of the property is removed. The cover does not apply at all if that happens. In one case the homeowner had existing cover for their house, but did not notice the exclusion for the roof removal. The house was wrapped and the roof was removed. A severe storm blew out the plastic wrap and the house was flooded.

The existing house policy did not cover the damage due to the roof removal exclusion. The contract works cover did not respond as the work being done was not damaged (only the existing house etc was flooded). What the homeowner needed was an extension to the building work insurance to cover their existing home during construction and removal of the roof. The failure to arrange that cover resulted in over $100,000 worth of damage not being insured.

Talk to your insurance broker about all the covers you need during your building project. If you are unsure it also pays to get advice from a legal professional experienced in building work insurance issues.

Leading law firms committed to helping clients cost-effectively will have a range of fixed-price Initial Consultations to suit most people’s needs in quickly learning what their options are.  At Rainey Collins we have an experienced team who can answer your questions and put you on the right track.

Alan Knowsley