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Building and renovating insurance

Make sure you and the builder have the right insurance to cover risks on the building site and risks to other people and property.

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Types of insurance

If you are building under a full contract, the building contract should specify the types and amounts of insurance cover the main contractor holds. The builder should have cover for:

  • Accidental damage to the building (builder’s all-risk policy or contract works insurance).
  • Accidental damage to adjoining property, and in some cases, for personal injury (public liability).

They may have cover for theft or damage to their tools but that is their concern.

Subcontractors may be covered by the main contractor’s policy. This is something the main contractor should sort out with the subcontractors but for your own peace of mind, it is good to find out who is covered for what. If the plumber causes a leak, for example when doing work in the upstairs bathroom, which damages the walls below, you need to know that the damage is covered under the main contractor’s policy. If the plumber is working independently, find out if they have cover for this type of mishap.

If building under a labour-only contract it is usually your responsibility to arrange the insurance.

You need to tell your own insurer when you are having alterations done to ensure you are covered for accidental damage to your both your house and contents while work is underway. Make sure your contents insurance covers the new appliances and fittings being installed.

Public liability insurance

All builders and contractors who are self-employed should have public liability insurance for protection against damage to third party property and personal injury to others, which is caused by the contractor’s negligence. For example, if a sheet of roofing iron falls off the roof and damages your car.

The amount of cover should reflect the type of buildings the contractor is working on - if the electrician manages to burn down your brand new million-dollar home in the final stages of construction, you need to ensure he has public liability insurance up to that amount.

In the case of personal injury, this would generally be covered by ACC. But there may be an occasion when you have been injured because the contractor was grossly negligent and you think you should be entitled to exemplary damages. The contractor’s public liability insurance should be sufficient to cover the costs and any damages awarded to you in a successful lawsuit.

Contract works insurance

The builder should take out contract works insurance to provide cover for property that is in the course of construction, i.e. damage to his own work. However, in the case of alterations and renovations, it might have to cover all building works.

In the case of a labour-only contract, it is usually your responsibility to arrange this insurance.

It generally covers:

  • Subcontractors damage to the site or project.
  • Damage to existing building and structures.
  • Theft, vandalism and arson.
  • Environmental damage from storms, floods, hail, snow, frost or earthquakes.

It does not cover damage to the builder’s plant and equipment – this would be covered under their own policy for theft or damage to materials and tools, etc.

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Case study

Bronwyn and her husband’s house was nearing completion. It hadn't been a smooth process - too many things had gone wrong. It was nearly the final straw when they turned up early one morning to meet the builder and found that everything had been stolen - appliances, taps, carpet and even the log fire. Fortunately they had insurance so everything was able to be replaced. The police told them it was done by thieves that specifically target building sites, so insurance cover, and a site security plan to make sure everything gets locked up at the end of each day, is essential.

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