The majority of people fail to notify their insurers when they undertake improvements to their home and this can often leave them without adequate cover and, in some cases, with no cover at all. If the works are extensive, such as an extension or conversion of the property, you may need to adjust your policy or even change insurance provider entirely to ensure you are not exposed to risk.
What are the limits?
The average household policy will require works to be disclosed varying from £0-£25,000, with some specialist policies requiring disclosure over £100,000. This limit can usually be found in your policy wording. If the contract works fall within your limit, it will usually mean that the insurer will cover the works in progress and in the event of a claim the insurer would attempt to recover costs from the contractor. This right is sometimes waived when you enter into a minor works JCT (Joint Contractors Tribunal). For this reason, household insurers will usually cancel your insurance when you enter into such an agreement.
There are two main options to insure your renovation project.
Option one- Split the insurance between you and the Contractor:
This option will typically leave you with a level of exposure, but with the purpose of an overall saving on the insurance premium. You will be responsible for insuring the existing structure and the Contractor will insure the works in progress (including fittings and materials). The cost of the buildings insurance will typically be elevated due to the higher risk of the property suffering a loss or damage (especially if unoccupied) and the Contractor will sometimes charge for their ‘contract works’ insurance, thus wiping out any potential saving. This is not to say that savings are sometimes made, but this is at the expense of control over the insurance, all risks cover and a stress free claims process.
What is more;
- When your home is left unoccupied, the insurer will usually restrict cover to claims arising from fire, lightning, earthquake, explosion or impact by aircraft only.
- Damage to buildings caused by the contractor will be excluded. You’ll have to prove negligence and pursue the contractor’s liability insurer.
- You’ll have no control over the contractors insurance and whether they’re insured correctly, or even sufficiently for the job taken on.
Option two- You purchase insurance for the contract works and the existing structure:
With this option, you take control of the insurance for your project. You can include cover for the work, the existing structure, your contents and even non-negligent cover all under one bespoke product, specifically designed for domestic renovation projects.
What is more;
- You retains full control of the insurance and can ensure quality of cover, payment of premiums and understanding of any exclusions and warranties which may affect your cover. By retaining control of the insurance, if there is a dispute and your contractor absconds, you are left with the insurance and your capital investment remains protected.
- You enjoy ‘all-risks’ cover for the buildings and the works, instead of separate, restrictive buildings insurance with a long list of terms and exclusions.
- You have one insurer for the entire project, avoiding frustrating and costly arguments between insurers trying to decide who is responsible for a loss. This can put the renovation on hold, often at a further expense to you.
We must summarise by going back to the principle of insurance which is the peace of mind in exchange for a cost. In the first option, if you were to have a £500,000 re-build and spend £250,000 on renovating your property, there is a potential loss of £750,000 you could suffer, which may not be protected!
The insurance for renovating your home can be confusing, so ensure you get sound advice from a reputable broker.
Thomas L. Drury Dip CII
Private Client Relationship Manager
Direct Dial: 01799 588165 or 01799 582244
Saffron Insurance can provide a comprehensive market research and provide expert advice with a suitable solution for your insurance requirements.
Saffron Insurance is a trading name of Saffron Insurance Services Ltd. Registered in England 829892. Authorised and regulated by the Financial Conduct Authority. Registered office: 22 High Street, Saffron Walden, Essex CB10 1AX