3 Construction Insurance NZ mistakes you wish to know
There are three mistakes many people make without realising it when it comes to Construction Insurance NZ.
This article is prepared on the base of existing life examples and aims to provide you with as much information as possible so that you will be able to make a calculative decision about what you need and what you want. Construction Insurance NZ lets discuss it from the professioanl point of view. As we all know wants and needs are different for everyone however when it comes to insurance you are better off being fully equipped with knowledge.
Before we start let me ask you something:
When do you need Construction Insurance NZ?
You are right:
“If you are building a new house or adding a new room or even doing a major renovation to your house which includes changes to the existing structure. “
Keep in mind it is a requirement for you to have a Construction Insurance policy. Check your loan agreement from your bank – it most likely specifies this requirement.
If you are about to add a room to your existing house or even a new driveway, your existing House Insurance policy will not respond to a claim associated with construction activity.
The 1st mistake – rely only House Insurance
Many people think that their House Insurance covers the house at all times. You remember Mr. Bean’s famous saying “not quite”? Exactly. Your house is not quite covered by the existing House Insurance if you are in the process of major renovation.
What is the solution? Construction Insurance NZ or Site Cover NZ. These types of policies are going to cover you and your house during the construction period. Construction Insurance NZ can cover your existing structure during construction period. It is a recommendable benefit especially for a complex situation.
Many people leave the process of organising a Construction Insurance NZ to the very last minute. It is better to ask for a quote even before you get a loan. Renovation usually begins long time before an additional home loan is taken. By the time you are talking to your bank you already know about how much it will cost you to add a room or to change a driveway or even to add that long awaited swimming pool.
Once you know the cost of your project – get a Construction Insurance quote and advise your bank that you are going to ask for a new policy to be issued once your bank approves funds.
What is important here to know is that not many insurance companies offer Construction Insurance in New Zealand. Interestingly, New Zealand banks simply resell insurance companies’ products.
Obviously the reason why banks do not want to “play” in that field is based on the complexity of a Construction Insurance claim. Think about cost of a new project plus the cost of the existing structure (the house).
When you are just about to ask for a Construction Insurance NZ to be issued for your new project make sure you cover the basics.
The 2nd mistake – exclude earthquakes
Many people think that it is extremely expensive to have an extension for Earthquakes on the Construction Insurance policy. It is nothing to compare with the benefit it provides you – the house owner – if something goes wrong. Ask yourself – how would you feel if you were standing in front of your new almost built house (yesterday) lying in ruins (today)? Would you be devastated? I certainly would…
If your house was destroyed due to an earthquake… Imagine this: The bank (your bank) will most likely recall the loan and your House Insurance company would say “sorry”, subsequently declining the pay-out….
My logic is simple, we live in New Zealand and our country is “famous” for earthquake activities.
Your policy must provide earthquake cover. We can talk about necessity of this benefit as long as you want (till cows come home). Think of all those examples you have been reading in the local newspapers for the last 5 years.
Do you really need more proof to cover “why” – read any newspaper from Christchurch.
Not enough? Next time you see Rangitoto island – think: What was it before? You are right A VOLCANO.
The quote I below compares premiums for a Construction Insurance NZ with Earthquake extension and without. It is a real life comparison of Construction Insurance NZ, the only details you will not see are: Names and address of the new property. This quote is for a project of $1,100,000 and if your project will cost you less it will not be difficult to get a rough idea. The cost of an earthquake extension is only $529.45 and keep in mind this is for a project of $1,100,000
Next, and possibly even more important point to discuss about a Construction Insurance NZ mistakes is an extension that covers “Subcontractors”.
The 3rd Mistake – do not think about subcontractors
Make sure your Construction Insurance NZ policy to cover subcontractors.
Every day people ask me the same question: “All those contractors who work on my house/project have Public Liability Insurance, why should I cover them?” “You don’t cover them(!) – you cover yourself” (!).
All the guys who work on your house SHOULD have Public Liability Insurance, you are right, “they should”. Ask yourself would you be able to check every one of them who comes and goes?
Please allow me to provide you with a few job titles of those construction workers who visit your site:
- Site Managers and their Assistants.
- Building Site Management from the head office (if you employ a reputable big company to build your house).
- Construction Manager – this guy usually looks very important on the site and does not have tools in his tool belt.
- Contracts Managers – they usually come to check the number of hours builders spend on a particular task.
- Document Control managers from local council.
- Electricians – often employed as outsourced contractors by the building company you employ.
- Fire& Safety Engineers and managers.
- Health & Safety managers.
- Road Engineers.
- Maintenance Managers – these guys are going to come and check your project as it gets almost complete.
- Operations Managers from building suppliers.
- Planning Engineers from the local council.
- Quantity Surveyors.
Same question as above: Would you rather spend a few dollars to avoid the problem or risk the situation where your house is literally on the line?
The quote below compares premiums for a Construction Insurance NZ with an extension covering subcontractors and without cover for subcontractors. This quote is for a project of $1,100,000. As you can see the cost of insuring all subcontractors on the site like this is only $83.49 The quotes below are real life comparison of Construction Insurance NZ, the only details you will not be able to see are: Names and address of the new property. If your project is likely to cost less than it should not be difficult to work approximate premiums. Better way for sure is to get in touch with me.
Download AMP Construction Policy
Public Liability claims often come in various unexpected situations, for instance:
A client was building a very expensive house. The house’s driveway was very long and next to the driveway electricians run the house’s main electrical cable. The cable was damaged by the landscaping people operating heavy machinery. Since it was a lifestyle property the cable belongs to the owner and therefore it was a claimed under Construction Insurance NZ.
Another example for you:
Damage to a neighbour’s property during the period of construction work. Imagine your builders unload something using a crane. The load was not secured properly, slides and damages your neighbour’s house.
One more example:
A new driveway is getting build. Concrete contractors deliver concrete which subsequently escapes onto the neighbour’s section.
Here is another and more complicated example:
House plans have defective engineering design leading to significant damage to neighbouring property. Think about who will be involved in a claim like this: Your architect, builder, steel supplying company and so on.
The following example doesn’t often get discussed due to “she will be right” attitude: Bodily injury caused by your product (not otherwise covered by ACC). One of my friends, when he was building his new home, ordered huge doors from India… if someone gets injured he could become liable.
Last point of this discussion is to show you the difference between Construction Insurance NZ if you are building your house or planning to add something on site with or without town water. Once again the quotes below are for project of $1,100,000 As you would be able to see the difference is $151.80 only. Meaning if your site is located on the site without town water it’s going to be dear to compare to the site with town water. Obviously the risk is greater without town water.
If you want to discuss your Construction Insurance for your new project, please get in touch by using the form above or complete the form below with all the details about your project.
Construction Insurance - Get online quote
Note: Construction Insurance is only for Contract works where the contract period is less than 24 months, contract value is less that $4 million dollars and replacement of existing structure is less than $2 million dollars.
I look forward to talking to you and to looking after your Insurance needs.
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