For most people, home renovations can be incredibly time consuming and disruptive. There is a lot to organise and manage – all on top of what has to be dealt with in our normal everyday lives. It is unfortunate that throughout the construction process most people forget to consider if their renovations will jeopardise the cover their home insurance policy is there to provide.
Most insurance contracts contain a Duty of Disclosure clause that requires the homeowner to notify their insurer of impending changes to the insurer’s risk exposure that may influence their decision to cover the risk. Renovations to your home certainly fit into this category. Insurers usually ask this question when initially quoting your policy. In the event you answer “Yes” to a question about any upcoming renovation works, most insurers will decline to quote and request you call again once the renovations are completed. The reason for this is that insurance claims are much more likely to occur whilst construction is being undertaken at the home. It is fact that fire, theft and property damage claims increase significantly during construction phases. It is therefore critical to know that insurers can decline or reduce their claim liability if they are not notified about home renovations.
Are you covered by Builder’s Construction Insurance?
There is also a common false belief that the builder’s Construction Works insurance policy will adequately cover your home at the time of renovations. This is usually true for the new construction component, but what about the existing structure and the home contents? Often these are substantially more valuable than the renovations.
Some may argue that a Builder’s Public Liability insurance will cover the existing structure during the construction period. This may be true if it was clear that the builder was responsible for causing the damage. But what if the damage to the existing structure was caused by something unrelated to the construction, say bushfire or storm damage? The home and contents insurer could reasonably and confidently argue that they would not have been on risk in the first place had they known about the renovations. This leaves a clear gap in cover. The builder’s Public Liability insurance policy is not responding as the claim is unrelated to the construction work and the homeowner’s insurer denies liability on the basis it should not have been on risk during the renovation period.
Make Sure You’re Insured
To ensure your most valuable asset remains protected during construction and renovation periods, it is important to consider the following:
- Always advise your home insurer of any material changes occurring at your premises well before they are due to commence. If you are in doubt about the relevance, just call them to discuss it anyway.
- Ask your insurance broker / insurance adviser to review your builder’s construction insurance policy to identify precisely what it is covering and identify any gaps in cover.
- Depending on the size of the construction works, your home insurer may agree to continue to cover the existing structure. If not, they may at least agree to cover the contents in the home. Sometimes the excess may be increased for theft claims as normal home security is often reduced during construction phases.
- If your insurer does not want to cover your existing structure during the renovations, you should:
- Contact your insurance broker / insurance adviser and request their assistance with obtaining a Construction Works insurance policy to cover the existing structure for the duration of the works. You should also make sure that the builder’s Construction Works insurance policy is at the least covering the new renovations and also includes appropriate Public Liability insurance.
- Alternatively, you can ask your builder to contact their insurance broker / insurance adviser and check if their Construction Works insurance policy can cover your existing structure. If this is an option, you should have this confirmed by way of a certificate of currency as evidence and have your insurance broker / insurance adviser check that everything is in order.