In the final part of our Backyard Subdivision series, we discuss the different types of insurance that come into play during a development project, and the need to get specialist advice.
When you insure your own house, we tend to get our insurance online or from the bank as a standard package. That approach does not work so well with building, due to the number of different people involved and the types of risk to insure. We recommend you use an insurance broker to sort out your insurance.
It is too easy to break some insurance requirement and find out your insurance does not apply.
Building insurance is only valid for a set time or until someone moves in, whichever comes first. If you get building insurance for say, six months, it is virtually guaranteed you will need an extension of time. Will you remember to get it? Or do you find out it has expired too late?
Tony’s Backyard Subdivision
Tony was reminded of the importance of having the right insurance when there was an accident on his site. The accident damaged a boundary wall in the new title area. Did the new building insurance apply or was it the builder’s contract works insurance, or the suppliers company insurance?
Turns out that because the damage was done to the wall by a building supplier, and this damage was done to a boundary fence, half of the existing house insurance applied and half of the neighbours’. Two different insurance companies, both claiming against the one supplier! Tony’s house insurance was with AA and he had got the insurance online – so contacting them and explaining it all was a bit of a challenge.
Builders’ contract insurance vs. your building insurance
This concept is important to understand when building, so if an incident does occur during the building process you will know who claims – you, the builder, or someone else. Builders’ insurance is generally more limited than your own insurance.
A critical distinction to make is what is covered in the policies. It will usually be either:
- Replacement of materials with new materials, or
- Payment for damage at the cost of second hand materials.
If you are currently building you must also keep in mind that the price of building materials and builders continues to rise, therefore with your policy, are you covered for the new replacement value or the just the old price?
Standard house insurance assumes you are living in the house. If there is an instance where a house is finished and no one is living in it while is it being sold the insurance cover will change. Some insurance companies will not cover claims if someone is not at the house regularly e.g. water leaks, their reason being if someone was living there, they would have noticed the leak. If you’re in the situation of having a finished, untenanted home, let your insurance company know.
It’s also worth mentioning here that these insurances are completely different to guarantees given by the builders, which are about completing work not covering damage.
Our biggest piece of advice would be to save yourself the worry – get an Insurance Broker to sort your building insurance requirements out for you. They are the experts and will guide you through the differing insurance policies.
Our thanks to Tony Savage for writing this article