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 critical risk control elements in one straightforward package. 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 3, 6, 9, 12, 18 or 24 months, or until the project is completed.
There are many misconceptions surrounding it, often fuelled by a lack of understanding, leading many people to assume they don’t require it.
In order, here are the top 12 misconceptions.
1. SURELY THE SELF BUILDERS INSURANCE COVERS ME?
They may say they are ‘fully insured’ and, in reality, probably believe it themselves. Still, 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 need covered.
2. I'M JUST DOING AN EXTENSION OR RENOVATIONS. I AM GOING TO USE MY HOME INSURANCE TO COVER IT
Home insurance definitely doesn’t cover building 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 been underinsured, they will reduce the claim proportionately. There are online calculators to work out the professional reinstatement cost of a build correctly – https://calculator.bcis.co.uk/.
5. IF THE BUILDER DAMAGES THE NEIGHBOUR'S FOUNDATIONS, ARE THEY 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. You will need to make special arrangements with your site insurance provider to get adequate protection in place.
6. I CAN'T BE RESPONSIBLE IF MY BUILDER FALLS OFF THE SCAFFOLD OR A LADDER
The Health & Safety Executive has produced clear guidance for self-builders, so you automatically carry responsibility if you are managing or exercising control over the project. You 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 Employers’ & Public Liability on most site insurance policies.
Most site insurance provides all the critical risk control elements in one straightforward package.
7. I'M NOT GOING TO BOTHER WITH SITE INSURANCE UNTIL I AM SOMEWHAT THROUGH THE BUILD
This is a short-sighted approach and, if anything, will end up costing more money – even if there are 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 SMALL 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…
Suppose an element of the property has to be rebuilt. In that case, 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 crucial you seek expert advice from a specialist site insurance provider before embarking on your build – it can save you thousands.
11. IT DOESN'T MATTER WHO MY INSURER IS…
Structural warranties are long-term policies of 10 or even 12 years, which is much longer than the average annual insurance policy. When you take out a product like this, you need to be confident that your provider will still be running until the end of the policy period, or your property could end up uninsured and in breach of mortgage conditions.
In the case of a claim, your insurer is responsible for paying, so you need to be confident that they can. You need to make sure your insurance provider is A-rated. An A-rated insurance company has been and will continue to be assessed by leading international rating agencies such A.M. Best, Fitch, Moody’s, or Standard & Poor’s (S&P).
A lower-rated insurer, such as a ‘B’ or ‘C’, is deemed to have a poorer ability to settle claims.
On the other hand, unrated insurers do not qualify for a financial strength rating by these agencies, meaning there is no evidence of their ability to pay claims. Their long-term stability has not been independently verified by these industry-standard companies.
Also, for unrated insurers based outside the UK, their local regulatory bodies may not subject their insurers to the same rigours that the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) do in the UK. Many are also not part of the Financial Services Compensation Scheme (FSCS) which can provide some protection to homebuyers if the insurer goes into liquidation.
12. WHAT HAPPENS IF I DON'T USE AN A-RATED PROVIDER?
If the insurer you select goes out of business, that cheaper initial premium you paid could ultimately lead to you spending more money in the long run. Not only could you lose the premium you paid, but you will have to also buy and pay for another new structural warranty, so you can sell the property onwards, as many mortgage lenders require a New Home Warranty before they will lend funds to the buyer.
There are a number of unrated suppliers in the market, so it’s important to ask their rating when considering them for your structural warranty.
Self-Build Zone is the market-leading provider of self-build insurance in the UK. Our award-winning site insurance and structural warranties provide A-Rated cover for your project, including cover for new builds, renovations, conversions and extensions.
For more information or to obtain a quotation, go online at www.selfbuildzone.com, or call the self-build zone team on 0345 230 9874.
