Although insurance is unlikely to be the most exciting part of your self-build project, it is nonetheless important. At a minimum, it’s about peace of mind. However, perhaps more importantly, it’s about providing adequate protection levels if the worst happens.
Construction projects can be unpredictable, and you need the right cover for any damage, loss of property, or losses while building your new home. Here’s what you should consider when it comes to insurance for your self-build project.
What Types of Insurance Cover Are Essential?
The key risk factors to consider insuring are:
- the property
- its contents, or your contents at a temporary home while your house is undergoing works
- the building works, and all materials
- neighbouring properties*
- insurance held by your suppliers, including public liability, employer’s liability and professional indemnity
* It’s often a requirement of a party wall award to have insurance in place to provide security for neighbouring properties.
What Should be Covered?
The existing structure: you should insure your home against damage and loss that occurs during any works
Your possessions: the items in your home, temporary address or those in storage because of the works
Works in progress: the sections of the property that are still under construction or refurbishment
Building materials and equipment: those materials that are on-site but not yet fitted to the property, for example, kitchen units, bathroom fixtures and fittings, and electrical goods.
Alternative accommodation: if your property becomes uninhabitable due to loss or damage from the building works
Public liability: if an accident happens due to your building work – for example, a scaffold pole falling and hitting a passer-by
Legal expenses: cover for legal costs in case you need to take action or defend a claim from third parties
Contract works: covers the potential cost of repairing or replacing any damaged part of the refurbishment or extension works. Note: this is in addition to the existing structure.
As Architects, we are not insurance experts. But the good news is that avoiding trouble is easy. You just have to remember to include insurance in your project timeline and budget. This will ensure it is on the radar from the outset rather than a last-minute rush, potentially delaying the start of a project.
Ensure your Suppliers are Properly Insured
Part of our role as architects and design team leaders is to guide our clients, advising them on which consultants, suppliers, advisors, or contractors are best for the project. Clients regularly ask about contractors, and while we can’t make any recommendations, we can certainly investigate the suitability of your shortlist and whether they have the correct levels of insurance in place.
While a contractor is working on your property, you, as the contractor’s employer, still need to provide cover for your building, which should remain in place until you reach practical completion. It is likely if you start a building works project without informing your building’s insurer, you will immediately be invalidating your building’s insurance cover. This is because the risk associated with building works differs from just a normal home. Many insurers can’t or won’t provide cover for a home undergoing substantial work, and this is when you may need the services of a specialist.
Contractors generally provide an “All Risk Policy” for the works themselves, but this may be misleading. Usually, such a policy does not cover all the possible risks of a building project, for example, it does not cover the building itself (bricks and mortar), and consequently, you should consider arranging an additional policy to protect your home fully.
What about Building Contracts?
It’s essential you use the correct building contract to clarify who is at risk while works are ongoing at your property.
What about Professional Indemnity Insurance?
As a professional services provider and to be a registered Architect, we must have Professional Indemnity insurance or PI for short. This insurance covers you if we make any mistakes in our work. You should expect the same from the other professionals you appoint to your design teams, such as structural engineers and surveyors.
You should always check that any professionals you appoint have the correct level of cover for your project. It should be equivalent to the value of the construction works plus the reinstatement value of your property, e.g. if you have a £1m reinstatement value of your home and a £1m project, they should have not less than £2m of insurance cover.
Don’t forget to consider contingencies in your budget and the rising cost of building materials.
What about Sub-Contractors?
If you appoint a main contractor, who then uses subcontractors for specialist work, such as electricians or plumbers, your contractor will be at risk and liable for any defects in their work.
However, if you appoint these suppliers directly, you will be considered the main contractor; therefore, you will need to check that they are insured for their work. This latter route is not favoured by insurers.
Do my Buildings and Contents Insurance Cover us?
Most people do not adequately assess the level of insurance they need for their home full stop, i.e. many people are unintentionally underinsured. However, adding a building project into the mix, such as an extension, basement, or loft conversion, can be even trickier.
It’s also easy to assume an existing building insurance policy will cover you while you are undergoing building works, which is usually not the case.
You might like to consult a specialist team such as Hiscox Private Client, who can look to provide cover, including building insurance, contract works, and contents cover.
While it is possible to use two different suppliers for your standard buildings and contents insurance alongside cover while you have building works ongoing, there may be gaps in coverage if you have two policies. It may be helpful to work with one supplier for the two elements, which comes with the bonus of a single point of contact if you need to make a claim.
Are there other Insurances to Consider?
For basement digs, underpinning, or any substantial ground works, specialist cover is available, called “Non-negligent liability cover”, which is sometimes required by a freeholder or adjoining owner. You will need to speak with a specialist broker or underwriter if you need to cover these risks as part of your project.
Be Careful of the False Economies with Insurance
As with all things, going for the cheaper cover can be a false economy, particularly if you are not fully covered for all eventualities and risks as identified above.
Also, be mindful of the time frame. It can be cheaper to take out a policy for 12 months’ cover for a ten-month project than to extend a ten-month policy by two months if and when (as often occurs) your build is elongated. With high demand for quality contractors and supply chain challenges, such delays are frequently the case.
This is by no means a comprehensive guide to insurance for building projects. However, hopefully, it’s a starter for ten. You can find out more from specialists such as Hiscox Private Client.
You can also speak to our team for guidance on your self-build project.