Insurance while you build
Protecting your assets and covering third-party liabilities1st Jun 2019
Building a new home, or having your existing one renovated, can be one of the most rewarding experiences. But, for most people, the thought of investing in a fixer-upper or a new build is more than a little overwhelming. The good news is that, with a little help and a lot of planning, it’s definitely possible to create the house of your dreams.
Most reputable contractors have a Contractor’s All Risks Policy in place, but you must ensure that the policy limits (sum insured, policy extensions, third-party liability, surrounding property and policy period) are adequate for the construction to be completed.It’s best to consult a broker, who would be equipped to advise you on this.
It is also possible for you to take out an insurance policy, which will let you sleep easy knowing that the policy is in place and has been tailored to the project’s specific requirements.
If this is the case, then remember to advise the insurers if the value, or the construction period, changes because the policy is only valid for the sum insured and the contract period on the policy schedule.
Some things you should do to ensure that your building project goes smoothly:
- Contact a broker with experience/knowledge of the product/policy and understanding of the contract. An intermediary plays a pivotal role in supporting clients by simplifying complex terms, assessing and addressing risk, providing expert advice and negotiating competitive pricing.
- Ensure that the sum insured or the contract value is correct, and that it is the same as the signed contract. The policy should have a limit on par with the total construction budget. Theoretically, the payout would enable you to rebuild the same home using the same materials and labour.
- Read through all the details of the contract and the insurance that your builder carries before you get started. This way, you can fill any coverage gaps with your own insurance policy. Ensure that your builder has a liability policy, which will indemnify the builder and workers in the event of damage or injury to other people or property (third parties) as a result of the construction.
- Make sure you understand what the policy doesn’t cover. For example, some common exclusions with the contractor’s all risks policy include: employee theft, earthquakes, weather and water damage. Cover for faulty workmanship, faulty design, and errors and omissions is more specifically insured under Design and Construct Professional Indemnity policies. Chat to your broker about the many extensions you can add.
- Ensure that the period of insurance is correct, and that SASRIA cover is in place. SASRIA provides cover against special risks such as civil commotion, public disorder, strikes, riots and terrorism. The policy you purchase will also cover a specified time, so make sure the coverage period is long enough for your needs.
Overall, getting insurance for building a new home doesn’t have to be complicated. Make sure to give it some thought beforehand, and consult with a broker or intermediary before you get too far along in the process.