- Your home is your castle
- Improving your home shouldn't mean putting your asset at risk
- Expert advice can help you make the right decisions
An Englishman’s home is his castle. It is also probably your greatest financial asset. But your home is also important for emotional reasons which is especially the case in these strange COVID times where we have been confined to our homes. Most importantly, your Home represents your family and is where you feel safe.
Greater numbers of people are also now renovating and extending their homes as an alternative to moving house. Many of these projects will be subject to a Joint Contract Tribunals (JCT) contract which may include more onerous insurance requirements which cannot be met by standard property insurers. Additionally, according to Renovation Underwriting, 86% of renovators don’t notify their home insurers of these works or take into account the contractual insurance requirements. As such, your largest asset and the place you call home, could be at risk if it is not insured on the right basis. In the event of a claim where works have not been notified, it is likely that Insurers will turn down the claim and withdraw cover. In addition, your home is likely to be subject to insurance requirements to comply with the terms of the loan/mortgage. If the home insurer is notified of the works prior to the works commencing, they are likely to withdraw cover or restrict to limited perils such as Fire, lightning, Explosion and Aircraft, a very restricted level of cover likely to be in breach of the lender’s insurance requirements.
It is easiest to think of your project as a work of art; the canvas is your home (the existing structure) the paints and materials are the Contract Works. The finished painting is the completed house.
There are various versions of the JCT contract, and they all impose insurance requirements in broadly the same way. In the case of the JCT Minor Building Works version (which is commonly used for standard domestic renovations), The options are as follows. Renovators will either go for a combination of A and C, or they’ll go for B.
A. New Build (works only) in joint Names arranged by the Contractor
B. Existing Structure and Works in Joint Names arranged by the Employer
C. Existing Structure and Works by other means
A combination of A & C will enable the renovator to sort out some level of cover with a standard Buildings insurer, but this will be very limited in scope, and will almost certainly exclude project related risk and damage. Under Option B, a specialist contract works package is required. These products are available, and they ensure all risks cover, including project risk for both the buildings and the works. The peace of mind offered by these products is a real draw, though they can cost more than less bespoke arrangements.
The JCT contract will often have a Joint Names Requirement which means insuring the property/works in the name of the Employer (you) and the Contractor but this clause is very often misunderstood and cover is not arranged in this way which results in a breach of the building contract. Whilst your contractor will have an annual Contract Works policy this will also provide cover for his other liabilities (Employers and Public/Products Liability) together with his plant, tools and equipment etc. If you are relying on his Contract Works cover, it is possible that this can be arranged in joint names as required by the contract, but it won’t happen automatically, and you’ll have to ensure that the contractor implements this requirement to be fully protected. In addition, the contractor will be unable to insure your Existing Buildings, leaving you seeking cover from standard Building insurers who are generally not happy to insure structures in the course of renovation.
So what is the answer?
A specialist renovation contract in joint names with the property owner responsible for covering the Existing Structure and Contract Works for the period of the works. This will satisfy the JCT requirements and put you in control of the policy. Once the works are complete and you move back in, cover can transfer back to your home policy. This is an area of cover which is not straightforward, so specialist advice will be required. If you opt for this type of cover, and in the event of a claim, you will find the insurance cost is the best money you have ever spent.
Please call or email me for advice and I will be delighted to assist.