A client had purchased a former care home with planning permission to partially demolish and rebuild it as a permanent home.
Prior to purchase they had been in talks with several contractors but were not yet in a position to place the £800,000 contract. However they estimated that works would commence within two months of inception.
The insurers the client originally approached were offering a short term unoccupied policy as a placeholder whilst the client chose their contractor; that policy would then be cancelled and the risk would then be moved and set up again on a building works policy when the works had started.
Unsurprisingly, the client was not keen on this - arranging specialist insurance even with the help of a broker is not normally a straight forward process and the chopping and changing of policies with the accompanying fees and partial refunds was not attractive.
Through the broker we promptly offered a single HomeWorks quote with unoccupied cover pending works for up to 6 months. The client had all risks cover from day one and was able to keep us informed about the contractors they were choosing, making our due diligence process simple.
Once the contractor was selected and the final cost confirmed, a simple MTA provided joint names insurance for the contractor while offering the client a small refund as the final total for the works came in under the estimated £800,000 contract value.
Talk to us
If you have clients intending to carry out building works on their property, whether they're buying it, letting it or selling it - our newly revamped HomeWorks policy provides all risks cover for the home, the contents, the contract works and homeowner's liability all under one single seamless policy.
Give our HomeWorks team a call on 0345 263 7468 or email us at firstname.lastname@example.org if you have any questions or to see if we can help.
Senior Trading Underwriter
Our HomeWorks product has been designed to give the type of cover you would expect from a standard household insurance policy but which also extends to include the contractual obligations of the homeowner.
- Designed to fit the requirements of standard JCT contracts,
- Cover for the contract works, the existing house and the contents under one policy,
- The facility for the policy to be written in the joint names of the homeowner and the contractor if required by the contract,
- One policy excess applies to all damage losses combined.
- Your client remains in control of the insurance arrangements,
- Liability cover for the homeowner while the work is being carried out,
- Wide policy wording where cover is usually provided on an ‘All Risks’ basis including theft, malicious damage and accidental damage.
- HomeWorks is available for risks situated in the UK and the Republic of Ireland.
Key aspects of the cover
- We can insure existing structures in joint names for "All Risks".
- We can insure the contract works, also in joint names, on the same basis as the existing structure.
- We can insure the home contents against all the standard home insurance perils.
- We can insure the homeowners' liability risk where a contingent exposure arises from the acts of the contractor.
- We normally give "all risks" coverage within the scope of a broad wording, nominal excesses and a very limited number of policy restrictions.
- We normally encourage clients to use HomeWorks irrespective of the joint names clause. This gives the client;
- Coverage for both the existing structure, the works and materials on a first party basis
- A consistent basis of settlement
- Only one insurer and one loss adjuster applies
- Only one excess
- Removal of grey areas as to what is existing structure and what is works or materials at the time of loss
- Only one point of contact to resolve the claim
- Option to extend coverage to insure "non negligence" type exposures
What restrictions in cover should I expect under a Homeworks policy?
There are a few key exclusions you can expect:
- Common market exclusions such as war, chemical, biological & nuclear attack and sonic boom.
- Risk management limitations surrounding the application of heat, retaining weather proofness, security conditions and unoccupancy conditions.
- Property taken into use or substantially completed.
Please note that this summary is not intended as a full list of our policy conditions and exclusions. For full terms, conditions, exclusions and limitations please refer to our policy summary and policy wording, available at the Document Centre.
Our signature HomeWorks policy has been updated from 1st July 2020 to give your client even more cover at no extra cost
Cover now extends 14 days beyond the policy end date – this gives the client time to source regular household cover or the contractor some extra time to finish last minute snagging without the need to request a formal extension
We've removed the £5,000 limit for loose contract materials – this is now covered up to the sum insured
We've increased the continuation of cover for when works are temporarily suspended from 30 days to 60 days
£100,000 franchise – no excess will be paid on a claim over £100,000
Trace and Access is now covered up to 20% of the sum insured
New - excess free replacement lock cover
£5,000 cover for the removal of illegally deposited waste
Why HomeWorks? When notifying their current household insurer of a significant home renovation, particularly where insurance cover is prescribed by contract, homeowners can frequently find themselves faced with numerous difficulties.
Home insurers are often unable to accept the risk of insuring what is effectively a building site with all the inherent risks that then brings:
- Removal of doors, windows and roofs,
- Delivery of plant and machinery,
- An increased number of individuals with access to the property,
- The application of heat during the works,
Depending on the circumstances, some insurers will look to stop covering the property and come off risk.
Alternatively, an insurer may provide some cover on the existing house but this is usually on a vastly reduced and highly restricted basis. This then puts the homeowner at risk of being in breach of any contractual obligations that may apply to the contract.
The Contract Works
Household insurers will not normally cover the contract works, preference being this is arranged by the contractor. This means the homeowner is reliant on the contractor's insurance to provide adequate cover.
This potentially leaves the opportunity for there to be both:
- Gaps in the cover - for example, the contractor may fail to arrange adequate insurance or breach their policy conditions.
- Grey areas in the event of a claim with two sets of insurers (and possibly loss adjustors) to negotiate as to what is contract works and what is part of the original structure.
At the very least, your client loses control over a key aspect of cover that they need to rely on to protect their interests in the event of a claim.
Joint Names Insurance
Where the work being undertaken is of a more substantial nature, the homeowner is likely to employ a professional team to oversee the project.
Architects in particular tend to work with “off the shelf” JCT (Joint Contracts Tribunal) as these provide a good template to deal with all aspects of the operation of the works and the relationship between the builder and the homeowner.
Within the JCT contract, the homeowner may be contractually obliged to insure in joint names with the contractor, both the existing structure and the works against loss or damage by specified perils.
By agreeing to insure in joint names the homeowners existing insurer loses the right to pursue the contractor and recover any costs they may have to pay out in the event of a claim, even if they have been negligent.
Insurers can be extremely reluctant to maintain insurance which is in joint names and could seek to reduce their exposure by limiting the extent of cover. This means meaning the homeowner might then be in breach of their contractual obligations as stated within the JCT contract.
This concerns the liability of the homeowner in respect of others to compensate them for injury or damage to their property whilst the works are ongoing.
A homeowner may think that if a builder he hires injures a visitor, that builders insurance will pay. This belief has some merit but a visitor will see the owner as the creator of the risk, even if someone is working on his behalf.
There are also other concerns that come with relying on another party’s insurance to provide adequate cover. For instance, the homeowner should ensure that the contractors’ insurance is adequate, is still in force (has been renewed) and that they are not committing acts that are in breach of their policy conditions.
Another important aspect to consider is the extent of liability cover required under a JCT contract. The standard JCT wording states that the contractor is only liable for their own negligence and not the negligence of the homeowner.
It is therefore very important to protect the owner from potential gaps in the cover from arising.
By this we mean the buildings of the home including out buildings, garages, walls etc. if cover is required.
Under this policy, cover is written on an indemnity basis. The cover provided will ensure that the existing property will be restored to the condition it was in prior to any loss (providing it has been insured for the correct value).
The breadth of cover provided will however vary dependant on the construction of the property and its condition. For example, if a property is lived in as a main residence and is in a sound condition, we should be able to provide "All Risks"* cover. If the property is in a dilapidated state and unoccupied, then the perils operating would probably need to be restricted in some form.
If contract conditions require insurance for specifically named risks, then we can usually accommodate this to match in with contract obligations.
The policy also provides cover for the cost of renting alternative accommodation if incurred whilst the property is being repaired following an insured claim rendering it uninhabitable.
(*Under any "All Risks" policy, there will be certain exclusions that apply e.g. A standard "All Risks" buildings policy would exclude storm damage to gates and fences.)
Contract Works (Materials)
This item covers the materials and fixtures and fittings used in the works carried out at the home against "All Risks"* of physical loss or damage.
The sum insured should be the full contract value inclusive of VAT.
We would usually cover, as standard, up to £5,000 value of loose contract materials on site at any one time, (subject to being satisfied with site security).
By this we mean the household's goods and personal property, within the home, which are the homeowner's property or which they are legally liable for.
If cover is selected, the home’s contents are insured against:
- Fire, lightning, explosion or earthquake
- Aircraft and other flying devices or items dropped from them
- Storm, flood or weight of snow
- Escape of water from fixed water tanks, apparatus or pipes
- Escape of oil from a domestic fixed oil-fired heating installation and smoke damage caused by a fault in any fixed domestic heating installation
- Theft or attempted theft
- Collision by vehicle or animal
- Persons taking part in riot, violent disorder, strike, labour disturbance, civil commotion or acting maliciously
- Damage to contents caused by subsidence or heave of the site on which the risk address stands or landslip
- Falling trees, telegraph poles or lamp-posts
Liability to Third Parties
Our HomeWorks policy gives an automatic cover of up to £2,000,000 in respect of your client's legal liability to others to compensate them for injury or damage to their property, arising out of their capacity as property owner during the period of insurance.
NB. Please note that there is no cover for contractors' or employers' liability.
Telephone advice for any private legal problem...
Within the UK* policy automatically provides a 24 hour advisory service for telephone advice on any private legal problem of concern to the homeowner or any member of their household. Specialist lawyers are at hand to help the homeowner or if they need a lawyer or accountant to act for them.
Whilst this section does not provide legal expenses cover, the helpline may be able to offer the homeowner assistance under a private funding arrangement.
As an addition to the legal helpline service, the homeowner will have access to a Legal Document Service.
This will provide them with:
- Access to a range of legal document templates
- A step by step walkthrough to assist in completing the documents
*The legal helpline and Legal Document Service are not currently available for policyholders in the Republic of Ireland.
For full terms, conditions, exclusions and limitations please refer to our policy summary and policy wording, available at the Document Centre.
We provide your client with a consistent basis of settlement because a single insurer underwrites the entire policy, under a single policy wording.
This means your client will avoid any potential “grey areas” in the event of claim and disputes that could arise with the client’s household insurer covering the existing structure and the contractor’s insurer covering the contract works. Each insurer would have their own policy wording and cover different perils, with different limits and exclusions. This could result in possible gaps or overlaps in the cover resulting in potential problems for your client when trying to resolve a claim.
In addition to that, each insurer is likely to appoint their own loss adjustor to work on their behalf, each trying to protect the position of their respective client.
Please note that claims are paid on an indemnity basis and not new for old.
Helping Your Client
Helping your client to safeguard their property and reduce their exposures.
During the course of works at their home, your client will be exposing this valuable and important asset to increased risk. Regardless of whether your client chooses to buy insurance to protect themselves (and of course, we strongly recommend that they do), it is still important that they consider ways of protecting their property and exposures resulting from injury or damage to a third party.
Considerations such as JCT contracts, non negligence and basement excavations all require additional understanding and explanation to the client. To help with this we have compiled the following which you may find useful to remind your client of the issues they need to be aware of when their home is undergoing works.
HomeWorks - A Brokers Guide (UK)
Why Choose Homeworks - The benefits of HomeWorks over a standard household policy (UK)
What is the risk? During works, the exposure to fire is greatly increased due to electrical work, welding work, use of paint removal torches etc. Should fire occur, it has the potential to cause severe damage to property (which could put the project back months) and endanger life.
Steps that can help prevent a fire at the property:
- Ensure that electrical wiring and appliances are worked on and checked by an adequately qualified electrician.
- Consider whether there is adequate fire protection at the home e.g. smoke alarms, fire extinguishers, etc.
- Consider banning smoking in or near the home.
- Seek advice from the local fire protection officer and consider the use of temporary sprinkler systems, etc, especially if the home is large.
- Any areas where work has been carried out involving heat should be checked thoroughly and the area not left unattended within an hour of the use of heat.
- Rubbish and debris created in the process of the works should be kept a suitable distance away from the building and especially if being destroyed by bonfire. It should be removed regularly.
Theft and Vandalism
What is the risk? Always ensure that the home and its contents are adequately protected from intruders. However, during the course of works, with workmen perhaps going in and out of the premises, doors and windows may be left open and unattended. Scaffolding may make access to the upper parts of the building easier.
Steps that can help prevent a theft from the property:
- Consider whether additional security will be required during the works to cater for this increased accessibility.
- If asking a contractor to secure the premises at the end of a day's work, ensure that they are aware of all the security measures that should be put in place.
- Works materials should be secured rather than left out in the open and especially overnight.
- If a property is unoccupied, particularly in a remote location, it is more susceptible to intruders. Additional security measures should be considered and proper supervision of the home/site should be carried out.
By this we mean the exposure to wet weather or storm damage and the damage that can be caused by faulty water apparatus such as pipes or gutters.
Steps that can help prevent damage to the property from water:
- Ensure that your property is weatherproof, especially at the end of a day's work. This is especially important of course when roof works are carried out or external walls knocked down or basements exposed.
- Gutters and waste pipes should be kept clear of any rubbish.
- Consider installing leak sensors or trays on pipes.
- If the property is going to be left unattended for any length of time we suggest that the water supply is turned off, especially if there has been any work on water pipes.
- During the winter, ensure that either the water is turned off when the house is unoccupied or that the central heating system is operational to a minimum set temperature to prevent water freezing in pipes and causing them to burst.
The safety of your client, their family, the contractors and the public is paramount. The very nature of certain works exposes everybody to an increased risk of injury.
If using a professional architect or contractor to manage a project the client should ensure that they are adequately qualified and that they have adopted Health and Safety procedures on site.
What is the Risk?
Whilst certain contract conditions between the client and the contractor may mean that they are responsible for insuring certain aspects of cover in joint names, (meaning that the client or their insurer cannot pursue a negligent contractor causing loss from a contract specified cause), there may be circumstances where the client or their insurer are able to pursue a recovery from a contractor.
Steps that can limit exposure to liability issues should they arise:
- Your client should check that any contractor working for them has adequate Public Liability insurance.
- Gutters and waste pipes should be kept clear of any rubbish.
- Contractors would normally have cover, somewhere between a limit of £1,000,000 to £5,000,000.
- It would be wise to ensure that their cover limit would be enough to reimburse the client should they be responsible for causing a total loss at the property e.g. if the clients house is worth £2,000,000, it would be sensible to insist that the contractor has Public Liability cover in force for at least that amount.
Non Negligence Insurance
We are able to provide quotations for non negligence insurance.
Helping you to help your client.
We know that the subject of building works and the jargon that goes with it can be daunting.
We're proud to be able to provide our brokers with a bespoke training service on our HomeWorks product and the risks associated with building works.
Either in person or via webinar one of our Senior Underwriters will provide an in depth training session followed by a general Q&A that can be allocated towards your CPD record.
If you would like to arrange one of these sessions please contact Head of Business Development Steven Bishop at email@example.com or speak directly with your Regional Trading Manager.