It is becoming ever more popular within the high net worth market to develop property rather than move; many standard household insurance contracts will want to cease cover on commencement of building works which can leave the homeowner in a real predicament.
The insurers I have access to will allow between £50,000 and £100,000 of building works as standard in their household policy coverage without having to be advised and some will even cover the property and works above £100,000 but will apply special conditions or endorsements to the policy until the works are complete.
When considering building works you might also want to think about employing an experienced project manager to oversee the build, particularly if the contract exceeds £150,000 in value. The project manager will help you stay within budget and planned timescales, they will be experienced in managing building contracts, they will also have various connections to the trades and contractors they have worked together with on previous projects giving you a further sense of confidence the job will be carried out correctly.
The main cause of concern for insurers is when a client enters into JCT (Joint Contracts Tribunal) with contractors and architects, it is not always clear for the client who should be insuring what and why.
JCT was established in 1931 by Royal Institute to assist with setting out building contracts. Over the years they have set out the industry contract standards for various levels of works.
There are three main types of contract:
- Minor Works – below £100,000 or non-complex works to £250,000
- Intermediate Works – complex building works (structural alterations) over £50,000 and up to £1,000,000
- Standard form JCT – contracts over £1,000,000
With regards to Minor Works there are two forms of JCT contract in use these are 2005 (revised in 2009) and 2011. The contracts will have clauses applied and the preferred option by insurers and for clients is:
- 4B – Insurance of the existing structure and works by the employer (client) in joint names.
Under Intermediate Works again two forms of JCT contract uses as above and the preferred option by insurers and for the client is;
- 7 Option C – Insurance by the Employer (client) of existing structures and works in or extensions to them in joint names
The reason for the above clauses being preferred and beneficial for both the insurer and client are that it gives them full control if a claim is to occur and the insurer has full subrogation rights to pursue a loss and financially compensate the client enabling them to not have a huge delay with completing the works.
The key point to remember is to always check the contract you are signing and entering into and if you are unsure seek advice from your insurance broker.
As mentioned at the start I have access to specialist markets that can insure the property undergoing the works along with the works itself and if you would like further information please do not hesitate to contact me and I will gladly assist.