We are doing a complete extension and renovation of our house, which will include digging it up and doing the masonry and roofing work.
We’ll have to leave for six months while that happens. What do we need to do about our buildings insurance?
I understand we need to tell the insurance company, but will the buildings insurance still cover us during this time and do we have to pay a significant extra premium?
How do you insure your home when making a major renovation? Or should we just rely on construction liability insurance?
Sam Parker in This is Money responds: Our reader takes the plunge and wants to make a major upgrade to their long-term home – but this is thrusting them into a world of non-standard insurance.
What better way to have peace of mind that their most precious asset remains safe and insured?
There are a few points that need to be addressed here. Does the homeowner’s existing buildings insurance cover the planned work, can it be extended to do so, or do they need a whole new cover?
And can they rely on construction insurance or not?
Although the reader’s inquiry focuses on securing buildings, there is also the issue of securing contents as property will have property in it.
This is Money spoke to a specialist to find out what the reader needs to do to be safe before major construction work.
How can this money help
Andrew Gibbons, managing director of insurance brokerage Mason Owen, said: In terms of Extension A and Full Renewal, the first red flag will be if this is a standard home insurance product. The possibility that a member of the public has been on the internet and purchased a basic home insurance deal. If not, their insurance broker will be able to advise them on the issue.
It is highly unlikely that standard product insurers will want to be involved in a renovation of this extent, especially if the home is going to be left empty for a while. So when that person makes the disclosure, they shouldn’t be surprised if their insurance company says they won’t be covered during renewals.
If the insurance company says yes, they can limit coverage and very likely charge an extra premium. The property will be left empty, may be open to the elements, and there is a higher risk of fire with people working on it.
“As projects get larger, people use something called the ‘standard form of a construction contract.’ That defines who is meant to secure what—the homeowner, builder, or architect and things go from there. But on the bottom end, projects don’t have that for the most part.” .
Sam Parker of This is Money adds: A homeowner is advised to contact their current insurance company or broker and ask if their existing home insurance policy can be modified to cover them while they work.
If this is not the case, they must take out a specialized type of insurance called “buildings in the course of change” or sometimes “extension” or “renewal” insurance.
The homeowner should also inquire with the old insurance company about canceling the home insurance for the renewal period and getting a refund due to the change in occupation.
When it comes to builder liability insurance, Gibbons points out, this may not be as beneficial as the customer imagines.
The builder owns – or should have – employers’ liability insurance and general liability insurance.
But the former only covers construction personnel, while the latter does not protect the homeowner’s home either because the conclusion is that public liability would cover the building. Maybe not!
“The subject matter of the construction work is the building, and therefore it may not be covered by public liability,” Gibbons said.
General liability will cover the builder’s responsibility to manage the contract site while it is under his control, rather than pay for property damage while working on it. The client will also have to prove negligence, which can be difficult in a construction scenario. Usually, insurance for the existing structure is the responsibility of the property owner.
The homeowner should also make sure their builder has Contractors All Risks insurance. This covers all contracted work and materials used in the renovation whether or not affixed to the existing separately insured structure.
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Before you begin, you’ll need to know how much it will cost you to rebuild your home for buildings insurance, as well as details of previous claims. For the contents, you need to know the total amount insured and any high-value or special items.
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The FCA’s new rules are intended to stop insurers from raising renewal rates, but it still makes sense to check for better deals on comparison sites. We suggest:
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Also try Direct Line which is not shown on comparison sites, and if you have previous serious medical issues, consider an insurance company or specialist broker.
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