Whether you’re building new or doing an alteration, extension or renovation, both your building contract and the homeowner’s lender will require Contract Works Insurance
What is contract works insurance
An insurance policy to cover for loss or damage that may occur during your project.
Contract works covers construction work that is underway. It can pay for rebuilding or repairing the work in progress after sudden, unforeseen and unintentional physical loss or damage.
This could include:
· Fire
· Vandalism
· Theft & burglary
· Accidental damage
· Storm and flood
· Subsidence
· Other natural hazards such as earthquake or tsunami can be an additional option
This cover can include the cost of the labour, materials and tools to get the work back to the stage it was at before it was damaged.
Who obtains the contract works insurance?
For a new build:
If it’s a full contract new build, most building contracts will require the builder to arrange the policy and the value should be included in the contract price.
This is because the builder will be Principal Contractor (Project Manager), they will be responsible for the property (also may hold Possession of the property) during construction, therefore it makes sense they hold the contract works insurance policy and will liaise with the insurance company upon any claim.
If your builder is labour only, then the Principal Contractor/Project Manager will be the one responsible for your project and the contract works insurance.
For an existing property:
If it’s an alteration, renovation or otherwise involves work to an existing structure, it is generally the owner’s responsibility to arrange contract works insurance; this should be specified in most building contracts.
During a renovation the homeowner is usually still living in the property, is still the main person responsible for the property and they usually have other existing insurance policies on the property. This is why it makes sense that they are the holder of the contract works insurance policy and would be the recipient of any claim.
Generally, it’s advisable for the same company that insures the existing structure to also cover the contract works insurance. This ensures any claim is the sole responsibility of one party, avoiding any conflicts in “responsibility”. The last thing a homeowner needs it to be in the middle of two insurers who believe the other is responsible for paying their claim.
How to apply
You can tag contract works insurance onto your existing home insurance for the duration of the project.
You will need to supply your existing insurer with the total cost of the work, the dates the work will be underway and the nature of your project, ie recladding exterior, extension on south side, internal renovation.
You will also need to request your insurer supplies you with a description of exactly what you are covered for (see below), they will calculate this for you. Most insurance companies only supply this upon request, even though it is a necessary attachment to your building contract.
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