Altering or updating your house? Don’t assume your insurance will cover you.

Did you know?

64% of UK homeowners don’t check their home insurance policy when they’re doing works to their property, and 55% did not inform their insurer they were renovating their home¹.

Why do you need renovation insurance?

When you are carrying out works to your property, your home’s defences are down. What was once a well-protected structure turns into a building site, vulnerable to weather conditions and theft of materials and equipment. You will have contractors, tradespeople, and deliveries throughout the duration of the works, in and around your home.

Because of this increased risk, most home insurance policies contain a standard clause that requires you to notify the insurer when work over a certain value is taking place. Following your notification, your insurer will decide whether they can continue providing cover, what clauses/restrictions will apply, or whether they need to cancel the policy from the date the work commences.

Failing to inform your insurer that you are working on your property leaves you at risk of your policy becoming invalid.

Should the insurer be willing to still insure you, you will often find that:

• They will not cover any aspect of the work undertaken.
• They will not pay for any damage to your home caused by the work taking place.

For example: if you are having an extension built, the new structure and any fixtures will not be insured, nor will the existing structure be covered if there is a renovations-related fire.

You can however buy a specific ‘Renovations’ insurance product that will cover both the existing structure and any work that is undertaken.

Will your building contractor’s insurance policy cover you?

The short answer is, not always.

It will depend on the type of building contract you sign as this will stipulate who is responsible for insuring the project.

If the contractor is not responsible, it is unlikely to matter whether they have insurance, as they will not be liable. It will now be your responsibility to arrange appropriate cover.

If you self-manage a project and bring in different contractors for different jobs, it is almost certain that the overall responsibility of insurance for the project will be yours.

Assuming the contract does make the contractor responsible for the insurance of the work, it then comes down to whether they have the correct cover.

Key Insurances

For most projects there are two key insurances that are required – Public Liability and Contractors All Risks.

Public Liability: intended to protect against accidents which are the fault of the contractor, i.e. mishaps with tools.

Contractors All Risks: for protection of the ‘works’ (i.e. new kitchen or extension) whilst in progress, against incidents that are not the fault of the contractor i.e. theft of materials, vandalism, flood, lightning strikes, arson, electrical fires from the existing wiring.

Where this cover has been purchased, it is important that it has been done so on the right basis which includes:

• Sufficient limit of cover for the value of the project.
• Accurate disclosure of the activities being undertaken, i.e. if the contractor has insured themselves as a ‘kitchen fitter’, they might not be covered if they later undertake a project to build an extension.

Reliance on your contractor

A simple mistake when purchasing their cover, such as failing to disclose a piece of key information, could result in the contractor’s insurance declared null and void. In this case you the homeowner, will be left facing the financial loss. This can have devastating consequences, as the example below demonstrates.

Please note: If your builder goes out of business or doesn’t complete the project, when they leave so does their insurance cover. If you appoint a new contractor, they will have to check with their own insurance company to see if they will be covered for damage to the work completed by their predecessor.

A true story…

This 5-minute film, commissioned by Renovation Underwriting and shared with their permission is an account of someone who experienced the devastating consequences of relying upon their contractor’s insurance through a well-known insurer.

Video credit: Renovation Underwriting Ltd

How can you mitigate the risks?

Your home is your largest asset, you need to have the right insurance in place to protect it.

• Make sure to tell your home insurer that you are having work done, and understand what they will and won’t insure you for.
• Use an insurance broker who can advise you on renovation risks and arrange your own cover for the project, even if your building contract doesn’t state this is a requirement.
• We strongly suggest you take out renovation insurance before embarking on structural changes or updates to your property. Doing so places you in control of safeguarding your home.

Self-managed projects

Many people ‘self-manage’ their renovation project. This means there will not be a primary contractor who is responsible for managing the project including sub-contractors, and health and safety on-site. Instead, the homeowner will manage the project themselves and take on these responsibilities and the legal requirements that come with them.

As you will be employing contractors directly, you may also require ‘Employers Liability’ cover and if you hire any plant machinery, you should also have cover for this. A renovations insurance product should be able to accommodate these different aspects.

Alternatively, email:

m.brown@lloydwhyte.com

What matters to you, matters to us

1. https://www.hollandgreen.co.uk/news/do-you-need-building-insurance-for-a-renovation-project/#:~:text=In%20reality%2C%20the%20most%20likely,to%20buy%20proper%20renovation%20insurance.

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