Building our dream home and need to know which insurances we need throughout the project
Problem: After some time searching, in 2017 my wife and I finally found and purchased some land in Leicestershire, which meant our dream to design and build our home, would become a reality.
We engaged a brilliant architect, and although planning was not quite plain-sailing, permission was eventually granted earlier this year. We are still at the pre-construction stage, but it will not be long before we can go out to builders to obtain tenders for the build, and I can see that by the end of 2020, our home will be completed to allow us to move in.
A few weeks ago, I engaged a chartered builder to put together the tender documents for the construction phase, and he recently came back asking what insurances we want the builder to provide and what we were taking out. He also mentioned whether we had identified the insurer who would be providing the post-contraction structural warranty.
I am reasonably familiar with the insurances that are required during the construction phase, such as employer’s liability and public liability. However, just to make sure, can you tell me of the insurances that will be needed?
Ensuring your risks are covered through the build and beyond with insurance
Response: Your project sounds really exciting and I hope that things go smoothly for you.
Construction phase insurances and structural warranties are very important for both the self-builder and businesses alike, as although they may be quite a significant up-front cost of a project, it is imperative that you ensure your risks are covered throughout the build…and beyond.
You have already mentioned employer and public liability. Anybody working on your site will classed as an employee for insurance purposes, thus your builder must have taken out employer’s liability insurance which will cover any injury, loss or death while the ‘employees’ are working on site. Public liability will be an insurance policy taken out by you (as the owner of the land), and this will cover you for any damage, injury or loss that may be suffered by third parties or members of the public, and is usually a relatively inexpensive policy to take out.
Another crucial insurance that must be taken out is contractors all risk. This insurance provides cover for risks such as fire, theft, vandalism, flood and storm damage. Such a policy can be taken out by you, the builder or in joint names.
Another insurance policy that you should be look at obtaining is legal expenses cover, although such cover is usually provided by the dedicated self-build insurance providers within a policy.
Finally, you must ensure that you obtain a structural warranty. This is an insurance post construction and will normally last for 10 years from the date that the build has been certified as being completed. Such insurance must however be organised during the pre-construction phase, as the provider of the structural warranty will need to see the technical details of the build itself, and to also monitor construction in order to minimise the risk as a structural warranty is there to protect you if there are any defects in the workmanship, design or materials used. In addition, if you ever came to sell the property within the 10 years of completion, the mortgage company advancing the loan to the potential purchaser will insist on a structural warranty being in place. There are many insurers on the market that will provide a structural warranty, with the most well-known being the NHBC.
© Michael Gerard 2019
The advice provided is intended to be of a general guide only and should not be viewed as providing a definitive legal analysis.