Whether for an entire dwelling or just an extension, this can be a more affordable solution for those that need more space or want to design and own their own home, rather than buying a standard property.
The self-build label applies even if employing builders to do the work.
However, insurance does not always figure highly at the top of the priority list for self-builders, who are unwittingly putting their homes and possessions at risk by not having adequate buildings and contents insurance.
The issue is not just one of whether the property owner has adequate cover at the outset of the building project, but rather ensuring they have adequate protection while the work is being carried out.
Importantly, that insurance cover should be adjusted as it is being built, to reflect the rising sum insured as the value of the property goes up during the build and once it has been completed.
Property exposed to risk
All too often people wrongly assume that they do not need to tell their insurers that work is being undertaken on their property.
They could not be more wrong; especially if the property is being exposed to risk during the work – for example tiles being taken from the roof (increasing storm damage exposure), load bearing walls being taken down, or new openings being created (adding to the theft risk until the new windows/doors are fitted).
Similarly, many wrongly assume that either their buildings insurance or the builder themselves will insure the work in progress until it is finished.
While all reputable builders should hold liability insurance, they will not cover the construction itself should it be damaged by storm or fire or for the theft of property, materials and equipment from the site.
How many homeowners will think to increase their buildings and contents cover once the work is finished?
Not only will the building be worth more, but a larger property inevitably means more contents.
Bespoke design
Self-build can mean anything from buying land and building it yourself, which can be a huge liability risk because you’re directly responsible; or by employing an architect and tradesmen to do the work (meaning you have less liability yourself but will still have a responsibility and liability to the public and tradesmen coming on site).
Also, take timescales into consideration. Building it yourself could take far longer than employing professional trades, requiring the insurance for longer.
If you’re self-building it’s probably safe to say that you won’t go for standard construction – most self-build involves an element of bespoke design and materials to be that bit more special.
For example, oak framed windows, the designer kitchen with island or polished concrete floors to provide that bespoke “wow factor”, all of which mean higher sums insured.
If the plan is to sell the property within 10 years, self-builders are also likely to need a structural warranty product to cover a 10-year period against defects in design, workmanship and material.
While this can be arranged prior to any sale, its far easier and cheaper to arrange it at the start so the insurer can be involved from the outset.
There may also be need for specific policies like title or legal indemnities.
Restrictive covenants, like agricultural ties for example, may also be an issue, particularly if the land has not changed hands for many years or has never been developed.
The conveyancer searches should establish if there are any issues.
Consider the impact on insurance
This is a prime example of the need to keep in regular contact with your clients and educate them as to the risks they face as their personal situation changes.
Many people won’t realise or give due consideration to the impact of self-building on their insurance cover.
If you’re organizing a self-build mortgage for a client, ensure they are appraised of the very specific risks and costs involved to avoid under-insurance, or worse still, a complete absence of adequate cover.
Helping them through such a difficult and stressful time with reliable advice and support will build on invaluable relationships for loyalty and ultimately, long term retention.
