Renovating? Are you fully insured?

Don’t let the excitement of a new renovation blind you to the major problems you can have if the correct insurance is not in place.

Everyone watching ‘The Block’ or Grand Designs gets excited about renovating, whether to update or extend due to new family commitments or as a way of increasing the sales value of the property.

But, in the excitement, they overlook the insurance repercussions, if the property is not insured correctly while the renovation is in progress.

Before we get to insurance, you need to know, what category of builder you are or are using. There is no category, of builder called ‘renovator’ in the Building Act.

If you are using a registered builder, he will be required to supply you Warranty Insurance on signing the building contract. Otherwise you are an Owner Builder and no warranty is required and you do not have insurance cover on the Structural Integrity of the building. 1

Now that you know which category of (builder) you are, we will explain the requirements of each category.

Q. But do I need extra insurance as surely my Home and Contents insurance will continue to cover me?

This depends, as long as there is not any work that is structural and secondly, what is your Home and Contents Insurer’s position on renovating – Read your Product Disclosure Statement closely, Ring them for any clarification, because they all have a dollar value on works that if breached, you do not have cover, plus check that Public Liability Insurance remains in place on your site. Home and Contents Insurance is designed to cover an existing home not a building site.

If you are using a Registered Builder

Notify your Home and Contents Insurer, ask and have the answers confirmed in writing about your coverage. Victorian law stipulates that if the work is over $5000 a major domestic contract needs to be in place and if the work is over $16000 Warranty Insurance is required. Check your state’s requirements, they will be similar.

Clause 22 of the NSW Builders Contract stipulates it is not a requirement that the builder insure the existing home and contents therefore you need to (a) have the builder endorse his Construction and Public Liability Policy to cover your home while it is being renovated or (b) find a Insurer to cover your home and contents. 2

Important: See and Keep a copy of the builders, Construction and Public Liability Policy.

As an Owner Builder (Renovator)

Check with your Home and Contents insurer, explain the project and the True value of the works as per what a builder would charge, plus ask “what am I not covered for when renovating and has anything changed in the level of cover?”

Important: Get it in writing!

Important: if a claim occurred the insurer would access the value of the work at builders rates not what it cost you with your friends and relatives helping.

What to watch out for:

  • Will the home be vacant for more than 60 – 90 days?
  • If there was structural work and no building permit obtained, will the insurer treat your extension as illegal building works (and exclude it from the policy)?
  • What is the policy’s limits of the policy – can be as low as $2000 which once exceeded you do not have cover?
  • If you are using a builder do not let them trick you into, “don’t worry about the Warranty Insurance, I’m a great builder” This is your protection that you would be giving up! Plus illegal work is not covered by your Home and Contents policy.
  • Under insurance is a major issue in the Insurance industry, DO NOT understate the value of the work, as you will be the loser. E.g. $100,000 job, insured for $50,000 in the event of a claim, under insured by 50%, payout $25,000.

Will Contents be Covered?

Important: Again we stress, read your Home and Contents Product Disclosure Statement closely as there are conditions that you need to be aware of that can void your policy while renovating.

If Your Home and Contents Insurer will not cover your home while the renovation is in progress then you will need Owner Builder Construction and Public Liability Insurance to cover your existing home and the renovation for fire, theft, storm, water and flood damage, vandalism and at least $5 million Public Liability plus contents.3

Are you using friends or relatives? What about yourselves? Voluntary Workers Insurance is inexpensive and protects your loved ones.4

Don’t take the risk of not insuring or underinsuring your existing home, renovation and contents.

Note: this article is general advice only.

  1. Latent Defects Insurance. Just released the policy is designed to protect you from any future structural defects that may appear in the 10 year policy period and it is transferrable.
  2. Renovators Home and Contents Insurance is taken out in conjunction with the builder. Covers the renovation and existing home for fire, theft, vandalism, storm, water and flood damage and Public Liability Insurance with Limited Contents cover.
  3. Owner Builder Construction and Public Liability Insurance. Covers the renovation and existing home for fire, theft, vandalism, storm, water and flood damage and Public Liability Insurance with Limited Contents cover.
  4. Voluntary Workers Insurance. Are you using voluntary labour (not paying) to help you? What would happen if they accidentally injure themselves while helping you. How would you feel? What about an injury to yourself ?? Voluntary Workers Insurance is what you need.

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