Renovation Insurance Case Study from Construction Insure

Removation Insurance Case Study

Project: Full renovation of property including removal of several walls, reconstruction of rear extension.
Project value: £1,000,000

Products taken up: 1) Existing Structure undergoing works insurance, 2) Contingent liability insurance & Contract Works Insurance, 3) JCT 21.2.1non negligence insurance, 4) Performance bond and 5) Building Warranty.

As much of the remaining structure was to be left in place and unoccupied the property needed cover incase a major peril (fire, lightning, earthquake, aircraft, explosion) was to occur during the development.
This protects you if clients or members of the public suffer personal injury or property damage because of your development.This was put in place if a subcontractor’s insurance failed to pick up a claim and therefore fell back on the developer (our client).
As there were major works going on at this property including a full redevelopment of a rear extension in was important the contract works were covered, as if this was to burn down or flood during the project it would not otherwise be covered. Additionally, if there was to be a theft of materials (such as the kitchen, or bathroom) during the project this policy would cover them.
With the property based in one of the most expensive areas of London it was imperative that non-negligence cover was provided, especially considering the closest neighboring property is 1m away. JCT 21.2.1 Insurance protects against expenses, liability, loss, claim or proceedings which may arise as the result of an injury or damage to any property which is not directly attributable to a negligent act. This problem arises out of work involving demolition, excavations, piling or underpinning as this can lead to damage to neighbouring properties including subsidence, heave, vibration, removal or weakening of support or lowering of ground water.
This project was a large residential renovation and the client wanted not only to make sure she was covered in every eventuality but also make sure it was completed on time. Additionally, if it was to overrun the client wanted to make sure that she would not with any unexpected costs. As she had not used this builder prior she requested a performance bond. Performance bonds, introduced by the Romans, guarantee the fulfilment of a contract. They do this by providing financial backing should the contract overrun or be halted for a reason outside the control of builder, such as a such as bankruptcy or insolvency. Typical (and as was the case in this incident) the bond is given at 10% of the contract sum.
Due to the large extent of the new works, the client wanted protection should a latent defect occur following completion. A building warranty was therefore taken out. This will protect the property for 10 years in the event a fault in the property is discovered that was not found through the inspection given at completion.

Looking to the Future

This product will also ensure that the property is able to be sold within the next 10 years should the client decide to move. Without a building warranty many mortgage companies will prevent sale or delay it until a building warranty is taken out, at which point the premium will be much more expensive as the appropriate checks will not be able to be made and so the risk for the insurers will be much higher.

This renovation insurance case study shows one example of how Construction Insure have helped their clients get the right cover at the right price!