Master of Money Management

Renovating? Check your insurance policy!

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It’s finally time to renovate your kitchen. After years of saving money and drawing up plans, you’re ready to knock a hole in the wall, rip out the old cupboards and build the kitchen of your dreams. But before you call up a contractor, consider how your new construction will affect your insurance needs, both during and after renovations.

Most home-insurance policies require that you insure your home to at least 80% of its replacement value. According to experts 25% of renovation efforts raise a home’s value more than 20%. If your renovations make your residence into a dream home, chances are you’ll need to raise the amount of your home owner’s policy to reflect the change. Otherwise, you could be stuck with a big chunk of the bill if a fire or other catastrophe forces you to make a claim. Remember, too, that your homeowners insurance covers the building materials that will pile up in your garden before you begin work. If a fire struck and destroyed both your home and the building materials, you might not be covered for the full extent of the damages unless you informed the insurance company that you were building. The call centre agent or your broker will guide you through the requirements.

It’s not just your home’s higher value that should figure into your insurance calculations. The decision to do the job yourself, with family and friends, or hire a contractor will also affect your insurance needs. If like most homeowners, you hire an outside person or firm, ask the contractor if he has adequate insurance coverage before the work begins. He should provide proof of insurance, in the form of a “Certificate of coverage,” for workers compensation and contractor’s liability coverage. Workers compensation insurance covers injuries to the contractor and his employees while they’re doing the work. If a worker was injured in your home and the contractor did not carry workers compensation, you could be sued, and your home owners coverage would not pick up the bill.

Contractor’s liability insurance covers the contractor for damage to your property while it’s under construction. If there’s a big hole in an outside wall and the contractor fails to cover it properly during a rainstorm, water could leak in and cause major damage. Though homeowners insurance will cover these damages, your home-insurance company will expect the contractor’s insurance company to pick up the tab if you make such a claim.

A reputable contractor will have this coverage and will be used to providing a certificate for proof of insurance. For the do-it-yourself home-repair guru, your insurance requirements depend on who’s helping you and whether you are paying them for the help. A friend or family member who’s injured while lending a hand can have his or her medical bills covered by your home owners policy. However, hiring a subcontractor or paying someone to help you makes you an employer, which means you must purchase workers comp to cover your liability in the case of an injury.

Insurance tips for home renovating.

  1. Keep your home-insurance agent informed about your renovation plans. He can help you sort out coverage needs.
  2. Know who is responsible for uninstalled appliances and other items, such as carpets and cabinets, in advance. Your contractor’s insurance should cover these items. Sadly, very few contactors have this kind of insurance so you need to get as much coverage from your own insurance company as possible.
  3.  If you’re concerned about medical bills should a family member or friend be injured while helping out with renovations, a personal liability umbrella policy can pick up the bills where your home insurance policy leaves off.
  4.  Having people you don’t know working in your home can increase the risk of theft. Even though there’s no more danger with a builder than with a cleaning or repair service, it makes sense to protect any valuable personal property.

Question:

My house has grown in value over the last 10 years but my policy says its covered for R400,000 (it is worth R1.5 million). Do I need to upgrade my policy?

Absolutely, you are totally under insured if your house burns down you will not be paid out the true value. You need to get an assessment done and submit it to your insurance company. Your insurance company can help you to arrange this.

I am renting a home and the wall next to the garage collapsed damaging my car, is the home owner liable to fix my car.

No, the landlords insurance policy will cover the damage to the wall but not to your car. You will have to make a claim against your car insurance.


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