Are you planning to get your home renovated? Insurance companies have a word of caution for you

With recent lockdowns and Covid-19 restrictions, including working for home, many New Zealanders utilised their time by renovating their house, primarily through Do It Yourself  (DIY) projects. However, many people do not think about the implications that could have on the insurance of their homes, including how their renovations will change their home and contents insurance needs.

According to a recent nationwide survey by insurance company AMI and Ipsos, renovations using DIY make one more prone to home underinsurance risk.

The survey of 536 homeowners, 170 of whom made renovations to their home in the past 18 months, which Ipsos carried out in November 2021, revealed that one in three homeowners have made significant or structural renovations to their home in the past 18 months. However, more than half (54 percent) did not update their home insurance policy as part of renovations being completed.

According to insurance companies, one needs to check if they have the right cover to protect the extra value added to their home in case of a disaster when they plan to renovate their house.

"DIY is a New Zealand way of life, and home renovations are no exception so, it's no surprise that throughout recent lockdowns, Kiwis have been making the most of their time at home. While ‘doing it yourself’ may be cheaper and any upgrades to your home may add value in the long run, however, there are some short-term risks, including greater threats of damage or loss to your property during renovations, and theft can also be an issue,” says Tower Chief Underwriting Officer, Ronald Mudaliar.

AMI’s Executive General Manager, Claims, Wayne Tippet, says all homeowners – regardless of whether they have carried out renovations – should be in the habit of regularly reviewing their insurance policies to ensure their home is adequately protected. "Lockdowns and international travel restrictions have given more Kiwis the time and budget to spruce up their homes – often making them bigger, more comfortable, and more functional for day-to-day living. If you're extending your home, rebuilding your kitchen, or adding an outdoor feature like a deck or swimming pool, it's important to contact your insurer to check you have adequate cover for the investments you're making,"

While cosmetic renovations, like painting and decorating, are generally covered under the home policy for any accidental damage while work is being carried out. However, for certain kinds of jobs, additional insurance is needed. Tom Bartlett, Head of Home Claims, AA Insurance, explains: “Some types of building works and structural alterations are not covered by typical home policies and require additional insurance. So, it pays to check with your insurer that you’re covered before you start any work.”

Interestingly, insurance companies are also encouraging people to have Contract Works Insurance (CWI), whose purpose is to protect your home from unforeseen damage while renovations are taking place. The survey revealed more than half (54 percent) of renovators did not consider taking out Contract Works Insurance (CWI), and a further 14 percent admitted to not knowing what CWI is.

“Homes undergoing major renovations enter a phase of being less structurally sound, which is why most home insurance policies have exclusions in place when homes are being worked on. Contract Works Insurance is there to cover damage caused while your home is structurally more exposed to risks. The emotional investment we make when we renovate can be just as valuable as the financial investment, so having the right cover in place will, at the very least, give you peace of mind that your home is properly protected before, during, and after renovations,” explains Tippet.

Giving further details, Mudaliar says, “At Tower, our home insurance policy has a 'house under minor alteration' benefit,' which safeguards our customers throughout the types of home renovations that are typical 'DIY.' For significant renovations that require professional expertise, a Contract Works Policy might be more fitting.”

He adds, “Making sure your insurer is aware of any changes in circumstance is one of the best ways to mitigate potential mishaps, doing so means that if you do need to make a claim, you’ve met the responsibilities of your insurance contract. As a general rule, you should always keep your insurer informed of any increased risk of loss or damage to your home - renovating would fall under this category.”

According to the survey, bathrooms and kitchens (45 percent each) were the most popular rooms to renovate, followed by outdoor areas (40 percent), bedrooms (26 percent), and lounge rooms (22 percent).

Tips to have a hassle-free home renovation:

1. Before getting started, plan and cost out the renovations, you want to make. Have a realistic budget and allow for unexpected extra costs.
2. Notify your insurance company, inform them of the extent of the work and check if they will maintain your cover. Depending on the size and scope of your project, obtain professional advice – if you’re not qualified to do a job, such as electrical work or adding an extension, and always use qualified licensed tradespeople. Remember to ensure the professionals you hire and their contractors are also insured. Ask for help with the consent process if you need it.
3. Consider taking out Contract Works Insurance before the renovations commence. This provides cover for unforeseen damage to your home while the renovations are underway.
4. Before commencing the renovations, check that your home, building, and contents insurance is up to date during the upgrades and after.
5. Once renovations are complete, your home and contents may be worth more. Be sure to contact your insurer to make sure all your hard work is covered under your policy.
6. Keep in mind that faulty workmanship that contributes to the damage of your home may affect any resulting claim, so get it checked out.
7. Considering new tools, appliances, furniture, and accessories bought during the reno, the chances are that the value of your content has increased. Be sure to regularly check your contents insurance and make sure your sum insured reflects these additional expenses