Renovation insurance - Which insurance is which?
by Megan Macpherson
If you are renovating, this is an investment and a risk, so you should take out insurance. If you are contracting a builder, then they must have builders’ warranty insurance. This is mandatory for all works over $12,000. This will cover the cost of the works if the builder becomes insolvent, disappears or dies. Insurance covers non structural defects for two years and structural defects for six years after building is complete. The minimum amount of insurance cover is $200,000. A policy may limit claims to 20 per cent of the original building contract amount. A builder may have an annual builder’s warranty insurance, or take a policy out for each job they do. Before you sign a domestic contract, ask to see the builders warranty insurance. Check that it is specific to your site. The details for builders warranty insurance were changed in July 2002; any details from a policy signed before then, refer to the specific policy.
Owner builders are also suggested to take out builders warranty insurance. This not only covers them while they are building, but as the case with a contracted builder, the insurance covers the home even after it has been sold. If a house is defective and it has been sold, the owner builder could be personally liable for any defects.
When undertaking work over $5000, builders must also take out personal/professional indemnity insurance through the Building Practitioners Board. Professional indemnity insurance indemnifies the builder or tradesperson against legal liability resulting from any claim made during the period of insurance. The following tradespeople and professionals are required to undertake personal indemnity insurance; building surveyor, building inspector, quantity surveyor, engineer – (civil, mechanical, electrical and fire safety), draftperson - Building design (architectural, interior and services), architect.
Public liability insurance is required by the following tradespeople, to protect them from public liability; builder – demolisher (low rise buildings, medium rise buildings and unlimited), erector or supervisor (temporary structures).
If you are building a new home, or renovating your existing home, you should find out exactly how much your home is worth. Then, make sure your building and contents insurance covers the cost of its replacement.
While you are renovating, your home may not be as secure as it once was, especially if you have knocked down walls. Make sure your home and contents insurance policy will still cover your home if it is being renovated. Also, consider constructing temporary walls and fencing to secure your home while it is being renovated.