Home and Contents Insurance is designed to cover an existing home against damage, loss or burglary. It is not designed as construction insurance. Home and contents insurance policies will, usually, cover the homeowner for a limited amount of renovation work. If the value of the work is over $20,000 (what a builder would estimate the job value) then you won’t have full cover. Just because you and your friends can build it for $20,000 it would not matter in the event of a claim; the insurer will work on builder’s rates.
But there are clear limits to what a policy will let you do. The one simple rule, always and in all circumstances, is check with your home and contents insurance provider BEFORE you start with any works! You need to read very carefully your home and contents policy wordings because the insurer will exclude damage caused by storm, flood or water entering the building. Etc.
A lot of Owner builders assume that because they are doing the work themselves, or with help from friends that they will be covered ‘a maintenance issue’ or replacement of a worn out … ‘
Ring your insurer and be upfront with the consultant. Because in the event of a claim, an assessor will come to your home and you will be found out! And you will not be paid the full amount. [See article on www.buildsafe.com.au/u/insurance]
It is vital that when renovating/extending you insure the full value of the existing home owner builders are notorious for saving money, but by not insuring your existing home or under insuring, you are putting at risk what you are trying to protect – your family’s financial future.
Don’t take the risk!
Research clearly shows that most people do NOT read their product disclosure statement, and yet in the event of a claim that is what the insurer uses as the basis of accepting or denying a claim. So, ring your Home and contents insurer and ask these questions:
· I am renovating/extending to the value of $_, will you continue to insure my home during the project? Y/N
· Will you cover me for storm water and flood damage? Y/N
· Is the public liability for the whole site including the part of my home not being renovated? Y/N
· Are my contents covered? Y/N
· Am I covered for theft? Y/N
We are yet to see a home and contents policy that does NOT exclude loss or damage caused by water entering your home due to building alteration, renovating or addition.
If they say you are covered – Get it in writing!
If you are not comfortable that they will continue to insure your home during construction, a better option is to take out Owner Builder Construction and Public Liability Insurance to cover your existing home and renovation/extension and in the event of a claim – let the insurers fight it out – NOT YOU