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Renovation, extension and home improvement risks revealed

Anyone planning to renovate, extend or improve their home should be aware of the associated risks, according to leading independent insurance broking and risk management firm, TL Dallas. 

Private clients account handler, Kirstie Farquharson from TL Dallas said: “Most people don’t appreciate that when they undertake a renovation project, they are placing one of their largest assets at considerable increased risk. The majority also don’t realise that most household insurers include a general condition in their wording, stating that they must be advised if any work at home is being planned.

“Also, certain insurers won’t cover a home during a renovation project, so it is important to check what the insurer’s requirements are before work starts. For anyone altering their property, the insurer may decide to alter the terms of its insurance cover because of the change in risk. Depending on the insurer and type of policy in place, and the scope and cost of the works, an insurer could exclude covers such as storm, flood, theft, subsidence and accidental damage.”

In such circumstances, TL Dallas can arrange a specialist ‘renovation policy’ to ensure the right cover is in place to protect what is a highly precious asset, through a vulnerable time. Kirstie added: “This situation is not unusual but can sometimes come as a shock to homeowners if they were unaware that they need to take out and pay for a different type of insurance policy. Many assume that their contractor’s insurance covers the work, so question why they would need to take out additional cover.

“A contractor should have a public liability policy to cover damages to third parties caused by their negligence. However, this policy is designed to protect the contractor and it is important to add that cover will only respond if the policyholder, which is the contractor, is proven negligent. It can take many months or even years to prove negligence. So, if a fire broke out for example and caused a total loss, if the contractor or their insurer disputes liability, it could be some time before the repair works start and even may not be covered at all, if there was no negligence and the property owner was relying on the contractors’ liability cover. 

“Some contractors may have an all-risks policy; however, this extension can be expensive and only covers the work in progress, not the existing structure. If the existing buildings insurer restricts or will not continue the buildings cover, then there is a problem. 

“Furthermore, even when contractors do have an all-risks policy with contract works cover, it will only cover the contract works if a contract makes the contractor responsible for insuring them, which usually is not the correct option when working on an existing structure.

“It’s important to refer to the building contract and the insurance clauses in place as this confirms who is responsible for the insurance arrangements. Quite often, the contract requires the works and existing structure to be insured in joint names, which means the homeowner and the contractor. A specialist renovation insurer will normally prefer to arrange cover on this basis. It’s important not to sign a contract without ensuring its conditions can be complied with, and TL Dallas is happy to guide people through this process.”

Benefits of a renovation policy include:

  • One policy covering buildings, contents, art, valuables, liability and renovation works.
  • Comprehensive cover on an all-risks basis to fully protect all assets, including the renovations.
  • Not having to rely on contractors’ insurance, which may or may not adequately cover the works and which will not provide any cover for the existing structure of the home.
  • In the event of a claim there is one insurer and one loss adjuster so no disputes over whether a claim should be paid under the household policy or the contractors policy.

Kirstie added: “Because this type of insurer understands the project, they accept the increased risks that go with it and know how to settle any claim, should the worst happen.  Although this is a niche market, TL Dallas has access to several insurers who offer this specialist cover.

“Anyone planning to carry out works at home shouldn’t take any chances and can contact TL Dallas for specific advice, as having the right cover in place could save both money and heartache in the future.

“It is also worth noting that this type of cover can take longer to source, particularly if the works are complex. In addition to risk information, TL Dallas will also require copies of the works contract, the contractor’s insurance documents and a Gantt chart or schedule of works in order to provide expert advice and guidance. Generally, insurers require 30 days before work starts to consider the risk and their terms.”

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