Many South African homeowners are investing in renovating their homes to increase its value.
Whether you’re planning to revamp your kitchen, bathroom or do some landscaping, anything that affects the replacement cost of your home can affect the amount of short-term insurance cover and in turn your premium.
If you embark on renovating your home, it’s important to notify your insurer or broker, as this changes your risk profile during the renovation period. Renovations on your property exposes you to the risk of damage or theft to the property.
Most insurers require notifications of this type of risk change, as special conditions could be applied to the policy such as additional excess, or limited cover if there is theft or damage. It must be mentioned that personal liability will be excluded due to the high risk of having builders on your property and the possibility of them being injured whilst on duty or causing damage to third party property.
In addition, one would need to look at the extent of the renovations. For example, if you are gutting the house or removing the roof, most insurers would request the cancellation of the policy and have it replaced with a Contractors All Risk (CAR) policy designed for this type of risk. It is important to get your broker’s advice on this and see what your current policy will cover you for, in the event of a claim during the renovations period. Or more importantly, what you will not be covered for, and obtain the right type of policy for any shortfall in cover.
Your building contractor may have this insurance, which covers your property as well as the contract work, during renovations. Insist on being provided with a copy of the policy.
Most experienced and registered building contractors will have this insurance in place, and you should be covered in the event of building material theft, damage to your existing property or to those of neighbours, defective workmanship, and so on. Should your building contractor not have this insurance in place – you can easily obtain it through your broker.
Before renovations commence, it is advisable to have a CAR policy in place, which is easy to obtain. An upfront lump sum premium is normally payable, and the policy is valid for around nine months. It is accompanied with an option to extend cover for up to two years, generally at no additional cost.
The following information will be required to apply for a CAR policy, which will determine the premium a homeowner will be charged for comprehensive cover:
- Full description of contract works
- Insurance period – start and estimated end date
- Estimated contracted value
- Maintenance/ defects liability period
- Public liability limit (value)
It is equally important to remember that once you have signed the release and occupy your newly renovated home, that you immediately notify your insurer or broker of the completion of renovations done in order to have any special conditions removed from your policy.
You should stipulate the value of the renovations and increase your sum insured to accommodate this accordingly. If you cancelled your homeowner’s policy due to major renovations – now would be a good time to activate a new one.
Elizabeth Mountjoy is private wealth manager at FNB Insurance Brokers.