Whether it is your own home or a buy to let property, any renovation project is a serious matter, not least because of the expense and disruption.
How often have you heard the complaint that it cost twice as much as you bargained for by the time the building works are complete?
And if it is a let property you are looking to renovate, it is not just the cost of the building works themselves, but also the rental income that is lost whilst tenants cannot be living there.
An important element of the costs of renovating any property – your home or one that is let – is renovation insurance. Let’s see why that is so and look at what renovation insurance covers.
Why is renovation insurance necessary?
It is necessary because your existing home or landlord insurance is unlikely to provide the cover the property continues to need during renovation works.
Unless these involve nothing more than a mere lick of paint, your existing property insurance is likely to specifically exclude structural damage caused during such works and cover may lapse altogether. Building an extension, installing a loft conversion or making any kind of structural alteration, for example, is almost certain to raise alarm bells with your current insurer, who may refuse to cover the risk of damage to the existing property, decline cover for the new works, charge an additional premium, or terminate cover altogether. Renovation insurance is designed to meet those challenges.
It also helps you comply with one of the conditions almost certain to be attached to any mortgage you have on the property and that is the requirement to maintain adequate building insurance at all times – an almost universal condition, which is noted in guidance offered by Citizens’ Advice.
If you are the landlord of let property, your hand may have been forced into commissioning some degree of renovation in order to meet local licensing requirements which may have been introduced in your area – especially if the property is a House in Multiple Occupation (HMO), for which new licensing standards were introduced with effect from the 1st of October 2018.
If your regular property insurance becomes restricted or lapses because of the building works in progress, therefore, renovation insurance continues to ensure that you are complying with the mortgage conditions.
It is standalone cover but designed to provide temporary protection during the renovation works. Once the latter are completed, you revert to your normal home or landlord insurance – reviewing the total building sum insured to reflect the increased value of your renovated property.
Because it is temporary cover, therefore, a distinctive feature of renovation insurance may be the ability to purchase it for periods of less than the full 12 months normally required for other forms of general insurance. If the works are scheduled to last just three or six months, renovation insurance may be tailored to cover just this period – yet also remains sufficiently flexible to be extended if unexpected delays or hold-ups occur.
A detailed guide to renovating and what renovation insurance you may need is found in the library of different property guides we have published here at Cover4LetProperty.
Your current property insurance
Whether you own your own home or are the landlord of buy to let property, any insurer needs to know the use to which the insured property is put and any structural changes, modifications or extension that are built.
As the British Insurance Brokers’ Association BIBA) explains, these are “material facts”, which need to be declared to your insurer and your failure to do so may invalidate your home or landlord insurance.
Anything other than a simple redecoration of your property but one that involves building an extension or remodelling or refurbishment, therefore, must be declared to your insurer.
In view of the increased risks to the property during those building works, the insurer might decline further cover or increase premiums to continue to provide the cover which your home or let property needs throughout the building works.
Because the property is also likely to be unoccupied whilst extensive building works are in progress, your current insurers may respond in a similar way whilst the property remains vacant. An element of specialist unoccupied property insurance is typically required, therefore, to restore the full cover the building continues to need whilst works are in progress. The incorporation of such cover is something you need to take into account when you compare renovation insurance.
Before you start any renovation project
If you are contemplating any renovations, therefore, here are a few steps you might want to take in preparation:
- inform your current home insurer or landlord insurance provider of your plans;
- if these involve relatively minor renovation and redecoration works, the fact that you have informed the insurer may simply be enough;
- on the other hand, your insurer may want to impose additional conditions or charge an addiitonal premium for cover for the duration of the works;
- alternatively – and especially if the property may not be occupied during the building works – your insurer may impose conditions you consider unacceptable or even remove cover altogether;
- in that event, of course, you are almost certain to consider purpose designed renovation insurance.
If you have bought a property to let or to eventually use as your own home with the specific objective of renovating it first, you may find it difficult to secure even renovation insurance.
Therefore, you might want to turn straight away to a specialist provider capable of providing this type of cover from inception – from the time you buy the property even though you have not lived in it yet or let it to your first tenants.
What renovation insurance policies typically cover is loss or damage to both structural and non-structural work – but is generally limited to 50% of the total insured value of the original building concerned (up to £100k). The actual works themselves are typically not covered.
What does renovation insurance cover?
Although different policies may vary quite widely in the details, the following are some of the important elements typically covered:
- you need to restore the protection of the existing building against the usual major risks, which are likely to be that much greater whilst the works are in progress – whether because of the added risk of flood damage, for example, if the existing building is no longer wind and water tight or because of any structural damage caused during the work in progress;
- in addition to the existing structure, some renovation insurance policies may also provide protection against loss, damage or the need for reinstatement of the new works;
- the contents of your existing home or let property are also under greater threat during any renovation works – especially since the premises are likely to be unoccupied and for there to be no one on site for significant periods of time, especially at night;
- renovation insurance may restore the protection you need for the property’s contents;
Public liability insurance
- building works on your property may pose a risk of injury or property damage to passers-by, visitors to the site, neighbours and other members of the public;
- if one of these third parties suffers a loss or injury, you may be sued as the property owner – and claims may be substantial;
- public liability insurance provides indemnity against such claims – typically for at least £1 million.
When you compare renovation insurance, you might also want to check whether insurance against fire and theft is also included, since not all policies do so.
You might want to take on board the fact that when structural work to your property is being carried out, any claims relating to subsidence may be specifically excluded.
The website Homebuilding & Renovation explodes a number of myths about the respective responsibilities of property owner and building contractor when it comes to insuring premises in the course of renovations work.
Purpose designed renovation insurance helps to ensure that adequate building insurance is maintained for the property throughout the building works, including those periods when it stands empty and unoccupied, which is almost certain to be demanded in the conditions of any mortgage there is on the property.
Unoccupied property cover
One further important aspect of renovation insurance is its role in providing cover when your property is unoccupied for longer than a month or so – something that is almost certain to occur if extensive building works are being carried out and you need to vacate the home or temporarily vacate it of any tenants.
Even though there may be people working on the property throughout the day, there are significant periods of time when the property is empty – and these are times when it is likely to be at its most vulnerable.
When no one is living there, the need for minor repairs may go unnoticed and rapidly develop into major emergencies, whilst an empty building is especially vulnerable to squatters, vandals, arsonists and other intruders, cautions the British Security Industry Association (BSIA).
As a result of the heightened risks, most home and landlord insurance policies severely restrict the scope of cover, or regard it as lapsed entirely, once the property has been empty for longer than 45 to 60 consecutive days (the exact period varying from one insurer to another). Once again, renovation insurance plugs this gap by incorporating a valuable element of unoccupied property insurance.
What is the typical insurance term?
Whenever the builders are in, you are likely to have a carefully planned schedule of works that include a completion date. Delays in even the best laid plans occur and building works are notoriously prone to unexpected delays.
To make sure that adequate protection remains in place however long the delay in completion, therefore, renovation insurance is typically flexible enough to allow extensions to the period of cover provided.
Since many such building projects are likely to be completed well within the full year, moreover, renovation insurance is also designed to offer the necessary short-term cover, which may be bought for periods of just three or six months, for instance, rather than the full 12 months customarily required for most other types of general insurance.
In short, if you are planning any renovation project for your home or let property, you might want to give careful thought to the need for renovation insurance. So, if you are about to embark on an exciting new renovation project for your property, just give us a call or get an online quote for renovation insurance today.