Building or Renovation insurance – who is responsible? (with thanks to Bridges Insurances)
Is it you or is it me?
Who covers what when it comes to renovating or building? Is it the Owner or the Builder? This is a question that is often raised late in the piece when considering building or renovating, however it should be one of the earliest points of discussion.
Whilst undertaking a new build or renovating an existing house can be a pretty exciting time, it’s also a time to be seriously organised. There’s the potential for things to go wrong in a project, starting right from site excavation through to the final paint on the walls. Building supplies can be stolen, a fire can occur or paint can be spilt at any point so it’s wise to know who is insuring what to avoid complications, delays and even more cost!
HOT TIP: If you’re borrowing money for a project, your lender will likely need to have their interest noted on the insurance policy. This will need to be done before construction starts so they can release funds. Doing this after the build has started can cause delays.
What is covered and what isn’t?
This will very much depend on the policy wording itself however, generally, Contract Works policies cover sudden and accidental physical loss or damage that occurs to the property during the construction period.
The policy should cover full Replacement Value i.e. the cost of rebuilding the whole project. If the owner is providing items to be included that aren’t in the Contract Value, then these can be insured too – they’re often referred to as Principal-Supplied Items and include things such as tiles, tapware and light fittings. It’s important to note that this is only designed for items that will be incorporated into the build – free-standing furniture, TV’s and whiteware aren’t covered.
There are also ‘allowances’ which are required by contract, such as professional fees, demolition & removal of debris and increased costs or variations. These are limited to either a percentage of the Contract Value, such as 5%, or a fixed amount – we can help clarify this for you before we start negotiating with your insurer.
A Contract Works policy should also provide extensions such as:
Transit – providing cover for materials in transit to the site.
Off-Site storage – provides cover for materials if they are stored off site before being included in the build.
Just as important, is being aware of what’s not covered by the policy. Some of the common exclusions are:
Construction equipment and tools
Loss due to delay, penalties, liquidated damages
Existing property – unless it has been specifically agreed to be included in the cover. THIS IS AN IMPORTANT AREA to discuss with us
Faulty design, workmanship or materials
The builder failing to complete the work
Our top 3 TIPS:
1. Make sure you have a contract in place!
2. Have the conversation early about who is responsible for arranging the insurance.
3. Call Bridges to negotiate Contracts Work insurance BEFORE the works start.
We’ve put together a checklist of the information your insurer will need from you when insuring a new project - download the checklist below.