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When do I need Contract Works insurance?

If you’re doing alterations or renovations to your house you might be wondering if you’re covered by your normal house insurance policy.

Depending on the works involved you may need a Contract Works policy, also known as ‘construction insurance’ or ‘ builders all risks’ cover.


Who arranges the cover?

If you’re doing an alteration, renovation or work to your existing house, it’s generally your responsibility to arrange construction cover.

For a new build, full contract works cover is required, and is usually arranged by your builder.


1. Works that don’t require Contract Works cover

Cosmetic Renovations

If you are doing cosmetic renovations to your house (with no structural alterations) you don’t need a contract works policy.  Generally your house insurance policy (including the initio house insurance policies) will cover damage that occurs during the works.

What is considered ‘Cosmetic Renovations’

Cosmetic renovations are work that doesn’t involve structural alterations or changes to the house. Cosmetic renovations that are covered by a standard house insurance policy include:

  • Painting
  • Installing new carpet
  • Replacing a toilet
  • Removing a non-load bearing walls

If you spill paint on your carpet while renovating, there’s cover to fix the stain. This is not considered structural construction related damage, so your standard house cover will respond.


2. Works that require Contract Works cover

Structural Alterations

If your work involves any structural alterations to your house, you will need a separate contract works policy to have cover for construction related losses to the existing house, and for the new work itself.

Your existing house insurance policy will stay in place to cover non-construction losses (e.g. an earthquake), and your new contract works policy will provide cover for damage to the:

a) New work (e.g. the new garage being built, or the new roof), and

b) Existing house for construction related risks (e.g. storm damage while roof repair is half complete)

A standard house insurance policy will not cover these risks.

People are often confused about when contract works is required, and what it covers.
What is considered ‘Structural Alterations’

Some examples of structural changes include:

  • Re-roofing
  • Building a new extension to the house
  • Removing a load-bearing wall
  • Re-cladding

It’s works that involve changes to the supporting parts of the house (e.g. bearing walls, beams or floor construction), or the weather tightness of the house (e.g. cladding and roofing). These require construction cover and a house insurance policy can’t be relied on to assist.

Still unsure if your works are structural? Contact us and we will let you know, or contact your insurance company.


What if I do structural work but don’t get Contract Works cover?

Essentially you’re taking the risk of damage to the new works, and any construction related losses to your existing house not having cover.

This will only be covered by a contract works policy, and are excluded from your house insurance cover (see below).

Causes of loss not covered

You are not covered for loss to the home connected in any way with:
1. structural additions or structural alterations, unless:
(a) we have been notified of the additions or alterations before hand and we have agreed in writing to cover this.

Examples

Construction related losses that would require contract works cover:

  • Builder puts nail through water pipe, causing internal flooding.
  • Blowtorch catches fire on wiring and house extension is fire damaged throughout.
  • Builders were replacing roof, and strong storm winds ripped roofing off when it was half complete.
  • Roof trusses collapse when builders removed load bearing wall

Note that these all relate to the construction work, and cause damage to the contract site being the existing structure of the house.

Consider your Risks

It’s up to you to decide if you need contract works cover. While there’s always an element of risk with structural works, you might be happy not to have cover if you think the risk and severity of damage is low.

You should consider the price of contract works cover and the peace of mind provided. Premiums start at around $500 premium for a small project. The longer the works take, the more expensive the policy will be.


My builder has liability cover, why do I need contract works?

Most builders will have some form of their own liability insurance.  Don’t be fooled – this is not a form of contract works insurance.

What does a builder’s Public Liability cover?

It covers them for accidental damage to other people’s property they are held liable for. For example, the builder walks in the house with paint on his shoes and damages carpet.

Note that a builder cannot be held liable for something they didn’t cause (unless they are grossly negligent). If an earthquake or storm damages your work, your builder will not be to blame.

Most public liability policies also exclude property being worked on. In most cases your house is the product (so it’s unlikely there’s cover if the builder causes damage).

The upshot is you shouldn’t rely on your builders public liability policy as an alternative to contract works insurance.


Who is initio?

Initio is the pioneer of online house insurance in New Zealand. Founded in 2011 we’re a New Zealand-owned online house insurance provider.

From your own home to a block of flats – we insure it. Whilst we’re all about delivering a great online experience, you can still contact us via phone or email. You won’t get the run-around, we personally answer our phones and our emails.

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Disclaimer: This support article is a guide only. It is not intended as specific advice for your situation. It is general guidance only.  Consult your insurer/provider if you have specific queries relevant to your specific situation.