My Backyard Subdivision - Part 6: Insurance
I don’t recommend you try to get your insurance in place by yourself. With your own house, we tend to get insurance online, or from the bank as a standard package. That does not work so well when building, because of the number of different people involved and the types of risks to insure. I recommend you use an insurance broker to sort out your insurance.
I was reminded of this when there was an accident on my site last month.
The accident damaged a boundary wall in the new title area. Did my new building insurance apply or was it the builder’s contract works insurance, or the suppliers company insurance?
Turns out because the damage was done to the wall by a building supplier, and this damage was done to a boundary fence, ½ of my existing house insurance applied and ½ of my neighbours. Two different insurance companies, both claiming against the one supplier!
My house insurance was with AA and I had got the insurance online. So contacting and explaining it all was going to be a challenge.
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 6 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?
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. Builder’s 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 is rising quite sharply, 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. In the instance where a house is finished and no one is living in it while is it being sold – this changes the insurance cover. Some insurance companies will not cover claims e.g. water leaks if someone is not at the house regularly, their reason being if someone was living there, they would have noticed the leak. Therefore if you’re in the situation of 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.
My biggest piece of advice would be to save yourself the worry and 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.
My Backyard Subdivision - Part 5: Banking
For many backyard developers, engagement with their bank will be required at some point. It is always best to do this early to understand what requirements the Bank will impose on you either before you start developing or during the development process.