Article by Abigail Koch.
Stacey Newham, AOBIS Underwriter, responses in orange.
It’s renovating season, but it’s not always smooth sailing, capital gains and higher rents for investors.
One of the most common oversights that renovators make is to assume that their home and contents cover is adequate enough for their property in any circumstance, when it just isn’t the case.
We advise that home renovators understand what is and isn’t covered in their home and contents cover, to ensure they are prepared in the event of any on-site mishaps.
Surprisingly, in most cases there are two types of policies needed to adequately cover any risks in your renovation: your own home and contents cover, and cover taken out by the builder. If you are the builder, you will need to take out builders’ cover in addition to home and contents cover.
Here are the 10 most surprising financial risks to renovators.
1. Your renovation might not be covered if you don’t notify your insurer. In the case of some policies, if something goes wrong during your renovation you might not be able to make a claim if you haven’t informed your insurer about a renovation taking place. Some policies require you to list any building works as an added extra.
2. Some policies will lapse if a home is vacated for longer than a specific period. Thinking of vacating while renovating? Maybe think again. I advise homeowners to check their policies first to see if this might be the case. Some policies might lapse if homeowners vacate for more than 60 days.
3. Claims over $50,000 are not usually covered. The majority of home and contents policies do not cover homeowners for claims that occur during renovations over a set amount, often $50,000. Renovations over $50,000 will categorise homes as building sites. Over this value, homeowners’ legal liability cover – which protects them against claims for injuries on the property – could also be compromised. For the Owner Builder-when renovating ,we have construction and public liability product to cover the renovation, existing home and a contents option.
4. Limited cover for damage to building materials from unexpected events. Damage to building materials by listed events determined by the insurer can include break-ins, fires, earthquakes and accidental damage. These types of damages are covered, but often only up to a maximum of $5,000. I recommend homeowners seek the cover that offers the highest payout for such events. For Homeowners who are using a registered builder to renovate – we have a joint policy that covers the builders work, the existing home and contents.
5. Most policies won’t cover homeowners undertaking renovations. If homeowners are undertaking any part of the renovation themselves, or co-ordinating as a project manager, they may need builders’ insurance on top of their home and contents cover. For Home Owners who are using a registered builder to renovate – we have a joint policy that covers the builders work,the existing home and contents. And if they are owner building when renovating, we have construction and public liability product to cover the renovation, existing home and a contents option.
6. New owners of a renovated home can make a claim against the previous owner. Homeowners selling a home they recently built or renovated may need Owner Builder Warranty insurance to protect themselves against potential claims made by the new owner if they discover defects in the work carried out. If they are selling – we have available for all mainland states, Owner Builder Warranty.
7. Homeowners aren’t covered against incomplete or defective work if their builder hasn’t insured the project. Not many homeowners know that it’s compulsory for builders to have their own builders insurance if the residential work is over $12,000. This protects the homeowner if the builders don’t complete their work or the renovations they have done are defective; therefore homeowners must check their builder’s policy is up to date.
8. Limited or no cover for repairs to inherent works. Most policies exclude the builder’s cost to repair faulty work when the defect has been caused by previous faulty workmanship, or materials. Some insurance policies will not cover any of the costs to correct a defect, and any of the damage caused by it. Other policies provide limited defects cover, where the defect is excluded, but the resulting damage arising from faulty workmanship is insured. Homeowners must therefore read their policy to check what is covered.
9. Homeowners aren’t covered if work is abandoned after 30 days. A builder’s insurance policy might not accept claims for any damage arising out of abandonment of the renovation work exceeding 30 consecutive days, which could leave some owners in a sticky situation. I would advise homeowners check their policy fully covers them for renovation costs or look for another policy that will.
10. The policy is affected if the value of the home changes. Once the home renovation is complete, homeowners will need to revise their home and contents cover to ensure it reflects the new value of the home, which will have changed – hopefully for the better.
The best thing you can do to remove all doubt about your home and contents cover is to check your policy documents and contact your insurer directly, as policies can differ.