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Property Insurance
Friday, December 1, 2006
Site security

The long-term boom in the property sector encourages homeowners to believe they cannot overcapitalise their houses and has fuelled an unprecedented renovation boom.

Recent statistics show that building plans approved by municipalities have increased by 14.2% in the first half of the year as compared to the same period in 2005. Additions and alterations have increased even more by 16.3%.
But John Tyson, from Alexander Forbes Personal Services, warns that too few home renovators understand the double-edged insurance implications of their undertaking.
“Firstly, to make extensive housing alterations to increase living space, people normally hire building contractors. When alterations are being made to existing buildings the standard form of building contract makes it the owner’s responsibility to insure the work and any liability that may arise because of the work. Most people sign this document without realising the insurance implications.”
Mr Tyson cites several liabilities that can face a home owner during renovations:
Accidental damage to the contract works – that would be damage to the new rooms under construction;
Accidental damage to the existing structure – or damage to your existing rooms;
Theft of building materials or fixtures forming part of the contract;
Accidental damage to your existing household contents;
Theft of your existing contents;
Liability to a visitor who is injured on your premises because of the unsafe nature of the contract site, for example a visitor falling into an unprotected trench.
Even without a contract, he said, homeowners still have these risks if you manage the alterations yourself.
Most personal insurance policies do not cover these risks and Tyson suggests that individuals contact a broker to secure Contractor’s All Risks and Liability cover before commencing renovations. He also cautions that homeowners should ask about ‘surrounding property’ extension.
Secondly, once a home has undergone renovations, it is worth more so existing insurance cover may be inadequate meaning the property could be underinsured.
“Not only should people review their ‘bricks and mortar’ insurance cover, they should also look at their household goods insurance as people typically buy new furniture and fittings for new rooms and forget to tack these onto their existing household cover.”
 

Copyright © Insurance Times and Investments® Vol:19.6 1st December, 2006
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