The last thing renovators
want to think about is
insurance. We have asked
industry expert, Mark Adams, to
provide some insight into
why it is absolutely vital that
they do so.
We all love a challenge. So why
move when you can renovate? It’s the
Australian way. And if there was any
doubt about that, figures from the
Australian Bureau of Statistics verify
that renovating accounts for nearly half
the total value of construction work
across the country each year.
There’s a whole lot of money in
renovating, and a whole lot subsequently
at risk. And yet it seems that the vast
majority of people doing extensions and
renovations don’t get any additional
insurance, even though they are risking
the value of their project, and… here’s
the part they are unaware of… often risking
their entire house (which they thought
was insured but wasn’t).
According to figures gathered in
conjunction with some of the providers
of owner builder training courses, it
would appear that upwards of 89% of
renovators don’t take out insurance.
This may not come as much of a surprise to many of you. We can all appreciate that there
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is a great deal to
consider when extending or renovating
and insurance is likely to be placed by
many people towards the end of the list.
For some people it’s an after thought,
considered too lightly and too late, and
by others probably not considered to be
that important to think about at all.
But let’s be fair. Most of us would
agree that the natural line of thought
would go something like this, ‘Well, we
have a house and contents policy, and
renovating is pretty common, therefore
our policy probably covers everything.’
Unfortunately, this is a case where our
instincts are way off target.
Most home insurance policies will
not cover much of anything during the
course of a renovation over $50,000
in value (even less for some insurers).
Statistics suggest that well over half the
renovations being done each year are
above $50,000, so it’s safe to say that
the majority of renovators are far from
safe in their assumptions.
But what if you’re one of those who
is still thinking, ‘That’s ok, my project’s
replacement value is easily under
$50,000 so everything is okay.’ Well, it
really all depends on what you consider
to be ‘okay.’ In the examples we will
look at in this article we found the
cover provided by the home insurance
policies to be far from sufficient.
Questions to be asked
In those few cases where your policy
will remain in place, you should still
question how much the policy will really
be covering? And what are the right
questions to ask your insurer to get the
important answers that you need?
We agree with most renovators that
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this not at all obvious, until you’re told
about it. And we can certainly see why
it often gets tossed into the ‘too hard
basket.’ But fear not! We’ve taken some
of the sweat and uncertainty out of this
issue for you. Let’s discuss some of the
questions that you should ask.
We even took it a step further
and got our hands on the home
insurance policy wordings from three
of the largest insurers in Australia.
We carefully worked our way through
the information, and finally compiled
the summary below. We decided to
leave the insurer’s names out of this
article for the following reasons: a)
each insurer has more than one policy
wording, and b) policy wordings
are regularly revised and/or have
supplementary additions issued.
We are however suggesting that this
information is a good representation
of policies that are available. The three
insurers we settled on are very large
companies, and your policy is quite
likely to even be one of the ones we
looked at.
Q1: Does the policy cover Public
Liability claims that arise out of a
renovation?
Insurer A – NO, not if renovation
value is over $50,000
Insurer B – NO, not if renovation
value is over $20,000
Insurer C – NO, never
Notes on Q1: There is a significantly
higher likelihood of a Public Liability
claim occurring during a renovation
project compared to at other times.
This is why your existing house insurer
is not keen to cover these claims, and
why they rely on you to get construction
insurance to cover it instead.
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