Insuring for the correct value is important, as insurance policies like ours, covering domestic properties, generally contain a clause which reduces the value of any full or partial claim settlement should the insured amount be less than the correct rebuild cost.
Your client’s home should be insured for its rebuild cost (and not for its market saleable value). They should also include the rebuild cost of any outbuildings, garages, walls, etc if they require them to be covered, fees and debris removal.
The client may be aware of what this rebuild cost is, as they may have had a survey carried out on the property if they recently purchased it. If they have not had any professional advice regarding the correct rebuild value of their property, we suggest that they arrange for some now.
If the contractor or architect that the client is using for the works is suitably qualified, they may be able to guide them on this issue. If not, they could seek help from a local surveyor.
If the client owns a Listed property, it is protected by law and they should be particularly careful about assessing the correct rebuild cost. They will need to ensure that this includes like for like materials and the cost of hiring contractors able to carry out specialist techniques.
Your client will usually be given a price from the architect or builder carrying out the works and this will be the Contract Value.
The Contract Value is what they should cover under the Permanent and Temporary Works part of the policy. This should include irrecoverable VAT if applicable, fees and debris removal. If there are any items that will be salvaged from the building and used in the works, the value of such items should be noted separately under the Permanent and Temporary Works sum insured.
The client should be aware that the contract works value must also include items such as direct purchases and salvaged materials.
The contract work value provided must be the full market value and not any special or discounted price the client may have obtained.
Generally, where refurbishment/improvement of a house (rather than a new build) is taking place, the homeowner will be required to insure the house, its contents and the works in joint names with the contractor against specified perils.
Fire, lightning, explosion, storm, flood, escape of water from any water tank, apparatus or pipe, earthquake, aircraft and other aerial devices or articles dropped therefrom, riot and civil commotion. Depending on the condition of the property, HomeWorks would look to provide cover on an ‘All Risks’ basis.
Most home insurance policies exclude damage to your buildings and contents whilst work is ongoing. The policy conditions will usually require insurers to be advised. When they are, they may either refuse to continue cover, or will impose restrictions and will usually require an additional premium. At the very least, your client has a duty to advise their insurers of any changes to material information regarding their exposure to risk; if works are being carried out at their home, this would be classed as material information.
Therefore, even if there was no specific requirement or exclusion in the policy, they may still find themselves not covered in the event of a claim, should they not give their insurers information about works beforehand and specifically agree with them that they will provide them with cover.
There are 3 issues that an insurer would consider:
- The house becomes a building site with the increased risk of damage occurring.
- Home insurers are not comfortable insuring the works, preferring to leave this to the contractor.
- By expressing the contract in joint names, it means that any claim – at least for the catastrophe perils – has to be met by the homeowner’s insurer and even if the contractor is negligent, the insurer cannot obtain a recovery from the contractors insurer.
Yes, for the reasons given in the response to the question above. Most home insurers consider that whilst works are ongoing at the home, the risk of a claim is increased, regardless of any joint name issues.
There are several reasons why a homeowner should not rely on a contractor's insurance to pay a claim:
- There may be conditions in the contract between the homeowner and the contractor that specifically state that the homeowner has a responsibility to insure certain aspects of the risk.
- There may be no specific cover for the homeowner's property under the contractor's policy.
- The contractor may only be covered for damage to the homeowner's property caused by the contractor's negligence - this would leave the homeowner exposed to non-negligent damage such as storm, etc. It would also mean that, in the event of a negligent claim, the homeowner would have to take legal action against the contractor (and his insurers) to recover his/her loss. This can, of course, be a lengthy process.
- Whilst it is recommended that homeowners check that a contractor has adequate Public Liability insurance, it could be that there is some condition or flaw in the policy cover or that the contractor has not given his insurers adequate or correct information about his business that may mean they can avoid paying a claim.
- Lastly and most importantly, your client’s home is a valuable asset and they should ensure that it is properly protected. We suggest that the only way they can guarantee that they are covered adequately is to arrange their own policy.
We arrange the insurance for the period of the contract only. The period of works will be estimated by your client’s architect/contractor when they are commissioned to do the work.
Upon expiry of this period, the HomeWorks cover will cease unless you arrange for an extension to the policy with us if the works are continuing.
Please note that unless we are advised otherwise, our cover does not automatically extend or renew.
In certain circumstances we may be able to cover Existing Structures before work commences.
You should give us this detail when applying for cover.
Once the contract works have been signed off, the HomeWorks covers ceases automatically. The client should then arrange for cover to revert to a standard household insurance policy. If an architect is being used on the project, works are completed once they issue a Certificate of Practical completion.
As it is a material fact affecting the risk, the homeowner will still need to advise their current household insurer that work is being carried out:
- The insurer could take the view that the property is exposed to a greater degree of risk to damage. This could influence the insurers view as to the cover they wish to provide which could be greatly reduced.
- Also without a contract specifying the minimum coverage required (specified perils under a JCT/RIAI form of contract for instance), the homeowners existing insurer can restrict cover without causing the owner to breach a contractual obligation.
Both of these issues act to the disadvantage of the client and could leave them exposed in the event of a claim.
Even where there is no contract in place, HomeWorks can still look to provide cover. We might ask for additional information on the contractor being used and check that they have adequate liability cover.
Yes, you can. We insure the household’s goods and personal property, within the home, which are the homeowner’s property or which they are legally liable for, against all the standard home insurance perils.
Very simply, the only way for the client to ensure that their home is protected is by retaining control of the insurance arrangements. Relying on an insurance policy that they have not arranged could leave the client exposed in the event of a claim.
As with the increased risk of damage to your client’s property, the risk of injury or damage to other people or their property increases whilst works are ongoing.
The policy cover available with HomeWorks gives your client the benefit of their own liability cover as property owner and includes cover whilst there are works at the home.