London house fire demonstrates renovation insurance essential to homeowners
A recent house fire in Kensington London, devastated a £4million property which was unoccupied and undergoing major renovations to the basement. According to press sources, the cause of the fire remains unknown but was severe enough to force neighbours to evacuate.
Unoccupied properties which are undergoing major renovation work are famously unpopular with insurers. It may come as a surprise but it’s important to note that when major renovation work is undertaken on a property, most household insurers will reduce or stop existing cover completely.
Andrew Boldt of Insurance Tailors says; “Some insurers may offer cover known as ‘FLEEA’ (fire, lightening, earthquake, explosion and aircraft) for the building only, but this is not guaranteed”
As the property was a terrace, it has further financial implications to its immediate neighbours. If your neighbour currently, or is about to undergo major work, we would recommend confirming with them if they have adequate insurance in place and that they have considered all of their obligations to the party walls.
Many property owners take a chance and rely on their contractor’s insurance to cover the works element, but between this and FLEEA, a number of areas are left vulnerable. Boldt continues: “Neither, for example, covers you for theft, vandalism, flooding, storm damage or some types of accidental damage.”
In addition, you have no way of knowing what level of cover the contractor has in place, whether it is appropriate to your project, what the excess is or whether they will choose to place a claim when you think it appropriate (in cases of owners falling out with contractors this can cause serious issues). And even if all these barriers are overcome, any money resulting from a claim may be paid directly to the contractor, not to you. Even more worrying, in a recent survey run by Insurance Tailors it was found that 80% of homeowners had no formal contract with their builder at all.
Boldt adds: “Dedicated renovations insurance gives you full control of the situation, and it is the most cost effective insurance for projects above the value of about £100,000, with premiums at around 1% of the cost of the works as an approximate guide.
The key benefits are:
- The insurance is taken out by you, so you have full control over the policy and no reliance on third parties.
- It covers all risks on the property including flood, water, storm, accidental damage etc. and can include additional elements such as subsidence cover (critical when digging out a basement).
- It can include property owner’s liability and employees liability, which is critical if you’re going to project manage the renovation work yourself.
- Cover can include non-negligent party wall insurance.
- It will cover heritage and period buildings.
- It provides appropriate cover for residential, commercial and property developers.