Amy Shields, Portfolio Manager of Insurance Tailors talks us through the intricacies of a JCT.
“When undertaking renovation works on a property it is important to have a formal contract between yourself and your contractors. In addition to providing a formal legal framework for what tends to be a large transaction, from an insurance perspective this ensures that you and your home are fully protected.
Insurers often require a formal contract to be in place in order to provide cover, whether this is bespoke or more commonly a JCT. The specifics of a JCT are as follows:
– What is a JCT? JCT stands for Joint Contract Tribunal and they provide templates for contracts, with various options depending on the level of work being done.
– For a Minor Works JCT, this is suitable for non-complex works up to £250k or works sub £100k
– Intermediate Works JCT – suitable for complex works ranging from £50k to £1,000,000
Within the JCT there is an insurance section 5.4 that highlights who is responsible for insuring what. Under the Minor Works Contract, the options are as follows:
A – Insurance of the works by Contractor in Joint Names
B – Insurance of existing structure and the works by Employer in Joint Names
C – Insurance of existing structure by Employer in own name
B is generally the one to go for – this ensures that cover is taken out by the property owner for both the building and works, with the contractor named on the policy. This has several advantages, including:
– Puts you, the property owner, in control
– Provides one single policy, with one insurer
– Only one excess
– The policy provides all risks cover on the existing property and the works for the duration of the project
By choosing A and C together, this leaves a grey area of cover. A means the work is insured by the contractor (did you check your contractors insurance? Is it with a reputable company?). Under C you will arrange insurance on the building only during the works – however this cover will be greatly reduced, normally to FLEEA only – that is Fire, Lightning, Explosion, Earthquake and Aircraft. This leaves your building exposed to risks such as storm damage, escape of water, flooding, accidental damage, and subsidence to name but a few.
By having no cover at all, this leaves your property completely exposed, and is likely to be a breach of the terms of your mortgage (if applicable).
Another thing to think about – If there was a fire caused by the contractor, would you want the claim money to go to that contractor? If that contractor had just caused damage to my property, I’m not sure I’d want them to come back and work on my property again. By taking out the policy in your name, in the event of a claim, you are in control and all funds would come straight to you. By being in joint names, it also protects you should the contractors “disappear” for example, as this has been known to happen!
Contracts in joint names are the basis of Renovations Insurance and provide full protection for your property and the works you are undertaking.
To discuss your own renovation in detail please contact Amy Shields