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Home renovations and the impact on your insurance

Painting fence

Here in Australia we love a good home reno. It could be a simple pergola extension, bathroom makeover or a full home renovation.

But before anyone picks up the tools, it’s important that the insurer is made aware of the renovating that is intended, in order to see how the policy will respond in the event of a claim.

All home insurance policies will have limitations on the value of renovations that they will cover before the home policy is void.  It is critical that you check this with your insurance broker as the limitation can be as low as $50,000, whilst some direct insurers may not cover renovations at all. Renovations over the policy limit will not only potentially leave you uninsured for damage to the renovations but also possibly for damage to your existing home – meaning that you could be completely exposed.

All states have statutory legislated requirements in relation to Home Warranty Insurance which protects the consumer for rectification work if the builder dies, disappears or goes insolvent.  The builder should have this insurance policy in place but will issue the certificate in your name and normally oncharge the cost to you.  Often these certificates are asked for by council or at time of selling the home.  In South Australia any residential buildings works over $12,000 contract value are required to have Home Warranty Indemnity insurance.

Don’t confuse Home Warranty Indemnity insurance with a Contract Works or Construction policy which is specifically designed for the construction industry and covers physical damage to the contract works. The builder should also have one of these however you need to be aware that often this will cover the cost of the builders contract work but not the cost of repairing your existing structure if it is damaged.  This can be where a gap in insurance cover is created for you unless the policy is tailored to your needs.

Once the renovations have been completed you’re going to need to increase the sum insured on your home insurance. Be sure to have an accurate replacement value of your home in the event of having to rebuild from scratch. If you’re unsure, you can utilise a property surveyor to work out the valuation for you.

If this insurance minefield seems too hard to navigate, we can simplify it down for you!  So if you are going to renovate, give us a call. Your broker is always here for you when you need.