Simon Middleton, director for insurance and warranty specialist Self-Build Zone, provides us with the top 10 site insurance misconceptions.
Compared to, say, choosing a building system, insurance is probably one of the dullest products out there and one that certainly isn’t going to be initially high on your radar. However, it’s only when you have been targeted by an arsonist, or been on the end of a serious theft that you can truly appreciate just how important site insurance can be.
Most site insurance provides all the key elements of risk control in one straightforward pack- age. It should be taken out from the moment you exchange contracts on your plot, where you have a Public Liability exposure, and then continue to cover the plant on site, workers, materials and the works in progress right up to the point you move in. Site insurance is usually based on the professional reinstatement cost and runs for 12, 18 or 24 months, or until the project is completed.
There are many misconceptions surround- ing it, often fuelled by a lack of understanding, leading many people to assume they simply don’t require it. In order, here are the top 10 misconceptions.
1. Surely the builder’s insurance covers me?
They may say they are ‘fully insured’ and in reality probably believe it themselves, but the chances are they actually only have some Public Liability which covers them in the event they cause damage or injury to a third party following a negligent act, something you would have to prove.
What Public Liability doesn’t cover is issues like storm damage, theft of materials, and theft of plant, arson, or foreseen liability – essentially all the things you really do need covered.
2. I’m going to use my home insurance to cover it
Home insurance definitely doesn’t cover build- ing projects and specifically excludes alteration, renovation and extension as well as unoccupied properties. This was aptly explained in the ￼BBC’s Rip Off Britain programme in January 2013 where a couple’s build project was totally destroyed by fire and the home insurer refused the claim. Think about it – you’ll carry on paying the mortgage on a home that no longer exists.
3. The plant hire company always insures their equipment
The person signing the hire contract is invariably responsible for repairing damaged plant or replacing it if it is lost or stolen while on hire. You are also responsible for the continuing hire charges until it is replaced.
If you are hiring a crane and operator, you will be responsible and even a small crane can cost several hundred thousand pounds to replace. Plant, tools and equipment can all be included on a site insurance policy.
4. If I choose to insure for a lower value, it will save me money
You should insure for a value representative of a professional contractor clearing the site and rebuilding your project from scratch. If the insurer identifies you have underinsured they will reduce the claim proportionately.
5. If the builder damages my neighbour’s foundations, they are covered
This is a huge pitfall – if you are working close to your neighbour’s foundations and weaken them, that damage won’t be covered by Public Liability and you will need to make special arrangements with your site insurance provider to get adequate protection in place.
6. I can’t be held responsible if my builder slips off the scaffold or a ladder
The Health & Safety Executive has produced clear guidance for self-builders so if you are managing or exercising control over the project you automatically carry responsibility and could end up being prosecuted and fined.
A worker who is paralysed could be looking at receiving compensation running to millions of pounds to cover full time care etc. This is why you get Employer’s & Public Liability on most site insurance policies.
7. I’m not going to bother with site insurance until I’m some way through the build
This is a short sighted approach and if anything will end up costing more money – even if there is only three months to go, the insurance provider will charge you a premium based on the reinstatement cost from the point you started work.
8. The utility companies only charge a small fee for repairing damaged cables
Emergency utility repair bills can be thousands of pounds – it’s not just electricity, think about gas and fibre optic cables!
9. Surely my insurance will automatically renew?
Site insurance provides project based cover and is not annually renewable, so if you run out of cover you will need to arrange an extension – you will not be offered a renewal. Equally, if you finish early you will not be entitled to a refund.
10. I think you get cover on a new for old basis…
Clearly if an element of the property has to be rebuilt it will be built new, however plant tools and equipment are insured on an indemnity basis so a three-year-old digger will be settled at the replacement value of a three-year-old digger and will not be replaced as new.
In reality everyone’s circumstances and projects are going to be different which is why it’s really important you seek expert advice from a specialist site insurance provider before embarking on your build – it can literally save you thousands.