If you’re planning to extend your home it’s important to be aware of the insurance implications when making structural changes to your property. We explain why a standard household policy may not cover you once the builders move in.
Inform your insurer
“Most household insurers require you to tell them immediately if you’re planning to alter your home,” explains Towergate Connect Underwriting Director, Michael Cullum.
“If you don’t and you find you need to make a claim either whilst the work is ongoing or afterwards, it could be rejected. So before any contractors set foot on your property, speak to your current insurer, let them know what’s happening and ask if they will extend their cover during and after the building works.”
He continues: “When you initially purchased your insurance it was on the basis of how your home was, prior to any alternations. Therefore if you make a claim and your insurer is unaware of these alterations, your claim might be excluded on the basis you failed to mention changes were being, or had been, made.
“Even if the extension and increased property value is within your policy limit, if you’ve kept your insurer in the dark, your existing building and contents, as well as any additions, might not be covered.”
Typical wording in a policy document says ‘ we ask to be told straight away if anything changes in the future which could affect your insurance. Failure to disclose all relevant facts could invalidate all or part of your policy’ . Whilst standard policies do not specifically refer to home extensions, their meaning is clear.
The majority of standard home insurance policies will not cover building work, so check your contractors have the correct insurance in place at the outset. They should insure their extension work and liabilities.
Specialist firms that do cover ongoing extension work will expect you to have secured planning permission, complied with building regulations and ensured the contractors have met their insurance responsibilities.
If you’re extending a property and it varies from the norm, do not expect to source cover from a standard household insurer. Speak to a specialist home insurer if your property is; unoccupied, an unoccupied holiday home, a buy-to-let, under-pinned, in a region well-known for flooding, timber-framed, steel-framed, with a flat or shingle roof, an eco-home, being worked on by a professional property developer or having building work up to £150,000.
A number of standard home insurance policies offer blanket cover with generous building and contents limits, for example, up to £500,000 for buildings and £50,000 for contents.
These limits are in place to reduce the likelihood of under-insurance, but in some cases it could result in you paying more than necessary. A ‘one size fits all’ policy may not always offer the best value for money.
Re-build cost issues
Although standard policy limits are generous prior to any work being undertaken, it can be easy to unwittingly exceed these limits. It’s therefore important to be able to calculate the full and true cost of the building and items you’re looking to insure.
If you don’t know the true cost, under-insure and then have to make a claim, it’s likely you’ll receive a reduced payment for your claim. This ‘average’ price takes into account the percentage you’ve under-insured by and pays the claim in line with this. This means you may only get a partial payment or nothing at all.
The Building Cost Information Service (BCIS), part of the Royal Institution of Chartered Surveyors (RCIS), offers guidance on the cost of re-building properties and has an easy-to use calculator on its website – http://calculator.bcis.co.uk
Register to use the calculator by inputting your name and email address and you’ll then be emailed a password. Once you’ve inputted the password you can log onto the calculator up to four times a year. You’ll be asked for your property type, its style, number of storeys, bedrooms and bathrooms, your postcode, the year it was built, whether there’s garage space and your external floor area.
Once this information is provided, a re-build cost will be given. However, this is only a rough idea and as Michael concludes: “It’s your responsibility to get it right.
“The BCIS tool enables you to decide whether a ‘one size fits all’ policy is suitable or if a more bespoke policy, reflecting your individual circumstances, is more appropriate.”