Renovation Insurance

Just because your builder has some insurance does not mean it will cover you for any problems that could occur with your specific project or that their insurers will pay.

A builder’s insurance policy may well have exclusions and limits which will compromise the safety of your property. It’s common for contractor policies to have height and depth restrictions and restrictions for the use of heat. These exclusions are often missed from the cover as there is an additional cost to the contractor, so they have to opt to include this.

Although your builder’s liability policy should cover damage to the structure or works that results from their negligence, it is unlikely to cover your existing structure or things like storm or theft damage, subsidence, flood, malicious damage and so on. Your home insurance may cover this, though we recommend checking your policy for exact terms, conditions and restrictions.

If your contractor causes damage to the building, accidentally or not, your normal home insurance is unlikely to cover you.

Unless you have told your building’s insurer that the project is taking place, and they have agreed to provide ongoing full cover, you are unlikely to be able to claim successfully for anything. Failing to disclose a building project would be considered non-disclosure of a material fact and would entitle the building’s insurer to decline a claim.

We can insure a self-managed project – where the property owner is managing a series of contractors, but not undertaking the works with his/her own hands.

With a self-managed project, in addition to the standard risk information requested on our proposal form, we also need to know:

• What project management experience the self-builder has.
• Who is responsible for health and safety on site?
• Whether the Construction, Design and Management (CDM) regulations apply?

If it transpires that a self-builder has limited experience and has not adequately considered the health and safety implications and Construction, Design and Management regulations, then we may not be able to provide cover.

We cannot insure pure self-build projects – where the property owner is physically undertaking the work, whether this includes additional labour sourced elsewhere or not.

Party Wall Non-Negligence Liability Insurance (also referred to as non-negligent, 21.2.1 or 6.5.1 insurance) is a type of liability cover which is designed to meet a renovator’s obligations and liabilities under the Party Wall Act. 

The Act imposes a ‘strict liability’ on renovators for certain heads of structural damage to neighbouring properties stemming from the works. A loss adjuster would come to the property to assess the damage and if it is determined that the damage was not caused due to negligence, the homeowner undertaking the renovation work would be liable for the damage that has occurred. Because of this, it is not possible to rely exclusively on a contractor’s liability insurance to cover damage to neighbouring property. 

In a loss situation, the relevant insurers will establish whether negligence has been present, and this will dictate which policy deals with the claim. Where negligence is present, then the contractor’s liability insurers will be on the hook. Where there is no demonstrable negligence, the party wall insurer will take the claim forward.

In addition to protecting third party property from structural damage, the cover extends to include damage to areas of the policyholder’s own property not being worked on.

This cover is available whether the properties share a party wall or not.  Cover is available for any property in the vicinity that can be reasonably affected by the nature of the project or works being carried out.

The JCT (Joint Contract Tribunal) suite of contracts are standard contracts used on both domestic and commercial projects.

Insurers and contractors are usually well versed in these types of contracts to manage the relationship between a contractor and the employer (i.e.; the renovator/property owner). Within these contracts, there are clauses dealing with insurance. Our Renovations cover has been designed to dovetail with the requirements of the JCT contract, and in particular, we can offer ‘joint names’ insurance for existing structures and works.

The joint names requirement is a feature of the JCT suite. It would mean that the employer/property owner is the noted policyholder, but the contractor would be noted as a joint insured party. This would be on the existing structures and contract works. By having the policy in joint names means there is one insurer overseeing the risk in its entirety. This helps with things such as claims settlement and efficiency in doing so, because there aren’t multiple insurers disputing who’s covering and who’s not. Additionally, when a JCT contract stipulates the policy being insured in joint names, it means that a non-vitiation clause will apply, this means that even if a contractor were to breach a restriction on their policy, the employer/property owner’s policy would not be affected and would remain covered.

There are various forms of this contract:

• JCT Homeowner – the most basic form. Suitable for small, straightforward projects.
• JCT Minor Building Works – Suitable for larger projects, but where the works remain relatively straightforward.
• JCT Intermediate – for larger, more complex projects.
• JCT Standard – able to cope with massive developments. Rarely used on all but the largest of domestic projects.

There are various insurance options. We will offer advice about which options are appropriate for any given project.

If you submit the cost for the project wrong during the quote, or become aware that it is costing more than anticipated, you can correct this at any point. You will just need to reach out to your insurer or broker and ask for it to be adjusted.

There is a direct correlation between coverage and premiums. Simply put, the higher your coverage, the higher your premium. To deter people from purposely underinsuring your project to get lower premiums, insurers retain the right to apply the average clause and only pay out a proportionate amount for what you are claiming based on how much you are underinsured by.

For example, if you underinsured your project by 50% and you need to make a claim, the insurers have the right to underpay the claim by 50%.

A policy does include automatic uplift under both the buildings and works heads of cover. If the disclosure of sums insured at inception can be shown to have been reasonably and fairly estimated, then the policyholder will benefit from this protection in the event of a claim – if the sums insured have been accidentally understated.

For larger projects, particularly when high-end fit outs will occur, it is often not possible to accurately estimate the final spend. In these circumstances, we can issue the cover on a declaration basis, whereby the amount you declare would be the total amount you would be covered for. If, as the project progresses, that the actual costs are higher than the declared amount, then get in touch with your broker or insurer who can make the adjustment.

A specialist renovation insurance product is a non-renewable, single-period package which is designed to offer cover for the duration of the works. Usually, we will offer a contract term based on the projected duration of the project. Our policies can be purchased for as little as three months, or for multiple years in one hit.

If the project duration is underestimated, we can extend the policy. We can extend multiple times, but please be aware that we will eventually apply administration fees if we find ourselves extending repeatedly. It is important to be realistic about the time it is going to take to achieve practical completion on a project before the works start, to avoid excess stress and additional insurance admin fees.