It may not be the most exciting element of a self build project, but it is one of the most crucial. Insurance, put simply, is protection from total financial disaster. Anything that puts stress on a self build time frame or budget, an accident that incapacitates the self builder, a serious injury on-site that requires investigation, theft, fire, flood, having to meet legal fees and so on can have a catastrophic effect.
Insurance puts the self build project back to the stage it was prior to the incident and provides that financial cushion. It should be in place from the start of a project through to completion. Recognising the financial and emotional strain a self build project can put on a family, it is surprising the number of people who do not put mechanisms in place to reduce the risk of a financial or emotional breakdown.
What insurance do I need?
1) As soon as the land/site is purchased, Public Liability insurance should be bought. A site owner needs to protect against potential claims from members of the public. Public Liability insurance covers your legal liability for injury or damage. However, don’t rely purely on insurance – steps should be taken to prevent/discourage access, taking account of obvious hazards. Are there lakes or pits that should be signposted and fenced?
2) Any existing structure should be insured. As well as protecting the owners interests, lenders require such insurance. As with land, protect the property against unauthorised access, for example from squatters or children, and drain/isolate any mains services.
3) Next comes the actual building work and associated materials. A Contractors All Risk policy (CAR) insures the structure from the first footings to final completion. As the name suggests, this is a comprehensive policy so don’t accept exclusions such as storms as these are the very things a lender will want cover against. The CAR policy also provides cover for materials whilst on-site and in transit and can be extended to insure any owned plant and tools. Additionally, specialist self build policies provide cover for existing structures and caravans/site huts.
When hiring plant equipment or tools, check the hiring terms. Hirers may be required to insure the item, as well as making provision for ongoing hire charges, should it be lost or damaged. This can be added to the CAR policy at very little cost.
4) If you intend to directly employ sub-contractors, Employer’s Liability insurance is needed to dovetail with Public Liability cover. Where engaging a firm with its own people, management and equipment, Employers Liability may not be required. Injury to self-employed persons, friends or volunteers may well present an action against the site owner as an employer.
5) Liability insurances protect any legal liability for injury to third parties or employees but they do not insure accidents to the site owner(s). Incapacitation can affect budgets and timescales so protect against this with Personal Accident cover: it will provide some flexibility.
6) Contractor/supplier disputes. If work or materials are substandard and the site owner is in dispute with the contractor, Legal Expenses cover can help speed things up, protecting that all important budget. Many policies also provide cover for squatter evictions and other legal problems.
Many self builders, especially those knocking down existing homes and rebuilding, intend to store their old home’s contents on site, either in a container or a newly built garage. Many self builders find insuring these possesions difficult, as site insurance only covers a small amount of personal possessions, whilst household insurance will often not provide sufficient cover for contents in a garage. Self Build Zone specialise in insurance and warranties for self builders, so it’s worth checking if one of their policies meets your needs.
Insurance and risk management go hand in hand. Any insurance provider worth its salt should be able to advise on how to reduce the risk of an incident occurring. Those who secure insurance should not sit back and believe that, because the cover is in place, the risks posed by a self build site have been reduced.
Building sites are dangerous and a duty of care is owed to all those on or around it. Children often see them as playgrounds, and adequate fencing, signs and security are essential.
Insurance only responds to an actual claim; preventing an accident is vital. Aside from the moral and human dimensions, a serious incident could threaten a project through the risk of prosecution, additional interest charges or other costs resulting from delayed completion. A self builder must consider safe systems of working. These rules should encompass all hazardous operations, for example:
* Frame erection
* Working at height roofing, cladding and painting
* Working with heat blowtorches, bitumen, welding equipment etc
* The risk of asbestos
Effective risk management is about identifying the hazard, assessing the risk, reducing this risk to an acceptable level and putting in place protective measures. Once this has been done, actions should be recorded, detailing:
* Who is in charge of operations
* The safe means of access to and from all work areas
* Any lifting appliances (including their on-site position and gear to be used)
* Storage of materials and methods of dealing with hazardous substances
* How the work is to be carried out
* Equipment to be used
* Protective clothing and equipment to be worn
A warranty is not the same thing as insurance – warranties concentrate on the quality of the self build work and covers the cost of complete or partial rebuilding, plus rectifying work to a self build which has been affected by a defect in the design, workmanship or materials.
(MORE: Self Build Warranties Guide)
A Cautionary Tale
Brian Houstons 20ft fall off a ladder while decorating the ceiling of the stairwell of their new timber framed home in Dorset warranted two major operations and a long stay in hospital. As a result of his injuries Brian has been kept away from the IT business he runs and, as he had previously worked on almost all aspects of the house, the couple had to import labour to get the home finished. Even more galling was the fact that when he and wife Carol got round to looking at their self build insurance policy, for which they had paid £820, they were amazed to find there was no permanent accident cover. If ever there was a case of not reading the small print, this must have been it, says Brian. Our advice is to examine policies and shop around and always secure ladders correctly before going up them.
Liability is the main contractors responsibility.
If you own the site, you are responsible. Unless you have it in writing and checked with a solicitor that the main contractor will take full responsibility for any insurance and warranty issues associated with the project, you will need cover.
It’ll never happen to me.
Builders walking off site, digging up mains cables, damaging neighbours property, builder, supplier and material disputes, theft, vandalism, marital break-ups, accidents and injury are all common problems. No one is immune.
Site Insurance Providers
BuildStore, Self-Build Zone and Project Builder provide two year cover (with time extensions) for new builds, conversions and renovations in all the areas detailed under ‘What insurance do I need?’ (ABOVE). They offer generous limits for plant and equipment, site huts and caravans, tools and personal effects, liability areas, personal accident and legal expenses.
DMS Services offers a 15 month self build insurance for new builds only. Elements of the cover can be removed or added in, dependent upon requirements. Six month extensions are available and discounts are offered to self builders living on or adjacent to their site, experienced self builders or members of a trade association.
Many policies can be extended to include additional costs to comply with local authority regulations, alternative accommodation, debris removal, professional fees, extensions, existing structures and demolition. Some packages offer greater limits than others, plus add-ons such as personal possessions and cover for lost keys, so it pays to shop around. As effective risk management is vital, check who offers health and safety advice.
Only Self-Builder, NHBC and Self-Build Zone cover Northern Ireland.
Self-builders will be asked to estimate the Professional Reinstatement Cost of their property i.e. self building the home again should there be a total loss. Site clearance, architects costs, as well as building and materials fees, all have to be taken into account and it is this area, say the providers, that self builders under estimate.
This has two implications;
1) If a loss occurs two days before the completion of a two year project, the original building and material costs, for example, will have increased over time. This leaves a shortfall between the first estimate and the actual cost of rebuilding some two years later. In recognition of this, providers offer a buffer of up to 125% of the total re-build cost. However, insurers will base their repayments on re-build figures provided at the inception of the policy, and if these estimates are low, even a 25% top-up may not cover the shortfall.
2) More crucially, insurers proportion the pay-outs of any claim upon the reinstatement costs given by the self builder. So, for example, if the reinstatement cost of a building is 100,000 but to reduce premiums, the self builder had advised it would be 50,000, later on if a partial loss claim for 10,000 is notified, the insurer will only pay out 5,000.