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 1^st 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 2^nd 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 3^rd 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.

1/49

Please specify when construction works will begin (The Construction period start is either the commencement date of work on site; or the date the main contractor takes possession of the contract site, whichever is later)

2/49

Please specify when construction works will end (The Construction period expiry is the anticipated date at which construction will cease and the contract will be complete)

3/49

If construction has already started, do you know of any loss or damage that has occurred prior to you seeking this quotation?

4/49

Please, give some details

5/49

Please specify the maintenance period. This is a number of days for the builders to complete touch ups before the final sign off - this can be 5-10 days. (Cover during this period is limited to the contractors' legal liability to rectify damage contractors may do in complying with their maintenance obligations, or for loss or damage that arises from causes which occurred prior to completion of the works. The Maintenance Period commences when a Certificate of Practical Completion is issued, or the works are handed over to the Principal. Insurance during the maintenance period does NOT provide a guarantee.)

6/49

Who is the proposer for the insurance? The Proposer has responsibility to insure the contract works (and any requirement for existing structures in the contract). The principal is the employer, the person who is paying for the work to be performed.The main Contractor is the company or person undertaking the work.

7/49

Please specify principles name

8/49

Please, specify main contractor name (builder)

9/49

Please, specify principle name and main contractor name

10/49

Would you like to insure subcontractors? Subcontractors are considered to be site-workers for example: painters, who work on the site however might not have their own Public Liability Insurance. Subcontractors are not automatically "an insured party". Answer 'Yes' if sub-contractors are required to be insured. An additional premium is payable when subcontractors are insured."

11/49

What is the site location address?

12/49

What is the type of contract you are dealing with? New Construction/Alteration to Existing Structure. Provides cover for any permanent or temporary contract work on projects involving the construction of additions to and alterations to residential and commercial buildings/structures, plus all materials that will be incorporated into the specified contract work.

13/49

What is the type of construction you are dealing with? Indicate whether the work being undertaken is on a residential building or a commercial building

14/49

Residential. Please choose the most appropriate description(s) of work to be undertaken *Only applies to ‘New Construction’ type of contract **Only applies to ‘Alteration to Existing Structure’ type of contract

15/49

Does the contract involve work on one (or more) of the following: Remote Locations*: Remote locations comprise islands not forming part of the main North or South islands or situations which require the use of boats or helicopters to deliver materials to site

16/49

Commercial. Please choose the most appropriate description(s) of work to be undertaken. *Only applies to ‘New Construction’ type of contract **Only applies to ‘Alteration to Existing Structure’ type of contract

17/49

Does the contract involve work on one (or more) of the following. *Remote Locations: Remote locations comprise islands not forming part of the main North or South islands or situations which require the use of boats or helicopters to deliver materials to site

18/49

Does the work involves one or more of the following?

19/49

Is cover required for the existing structures?

20/49

Is the existing structure currently insured with AMP/VERO?

21/49

What is the replacement value of existing structure (excluding land value)?

22/49

Will the existing structure be occupied for the majority of the contract period?

23/49

Will a section of the roof be opened or removed during the works?

24/49

Will the structure be lifted or re-sited?

25/49

Will any load bearing walls or beams be altered?

26/49

What is the number of levels (including basement) will be at the end of the work?

27/49

Does the work involve any excavations or piling exceeding 3m in depth? Excavations can include foundation excavations, foundation piles, retaining walls or earthworks. Work utilising excavations/retaining/piling greater than 3m in depth is higher risk than standard.

28/49

Does the site have access to mains water?

29/49

Do you require Earthquake cover? (Recommended) We can provide additional cover for the perils of earthquake, hydrothermal activity and volcanic eruption up to the Total Contract Value. If selected, an additional premium is payable for this extension.

30/49

What is the sum insured you would like to have for contract works?

31/49

What is the sum insured you would like to have for principal supplied goods? Materials supplied at Principals cost under the terms of the contract e.g. bathroom fixtures & fittings purchased directly by the Principal for installation into their new home. The value of these items or materials needs to be included here when cover is required.

32/49

What is the sum insured you would like to have for professional fees?* (Fees paid to an architect, surveyor and consulting engineer incurred to rectify an insured event that damages the works. This value is populated from the contract works value entered into the Contract Works fields. You can increase the value if required) *There is Automatic cover under the policy for these items up to 5% of the combined value of the contract works and principle supplied goods, you only need to put figures in is you require more that 5% for these items. Please enter "standard" for 5% of contract works amount.

33/49

What is the sum insured you would like to have for the removal of debris?* Removal of Debris provides for costs incurred in removal of damaged parts of the works following an occurrence of damage. This value is populated from the contract works value entered into the Contract Works fields. You can increase the value if required. *There is Automatic cover under the policy for these items up to 5% of the combined value of the contract works and principle supplied goods, you only need to put figures in is you require more that 5% for these items. Please enter "standard" for 5% of contract works amount.

34/49

What is the sum insured you would like to have for the increased costs during the construction?* This value is often specified in the Conditions of Contract to allow for escalation of costs, labour and materials during the contract period. This value is populated from the contract works value entered into the Contract Works fields. You can increase the value if required. *There is Automatic cover under the policy for these items up to 5% of the combined value of the contract works and principle supplied goods, you only need to put figures in is you require more that 5% for these items. Please enter "standard" for 5% of contract works amount.

35/49

What is the sum insured you would like to have for the increased costs during reconstruction?* This value is often specified in the Conditions of Contract to allow for escalation of costs, labour and materials during the contract period. This value is populated from the contract works value entered into the Contract Works fields. You can increase the value if required. *There is Automatic cover under the policy for these items up to 5% of the combined value of the contract works and principle supplied goods, you only need to put figures in is you require more that 5% for these items. Please enter "standard" for 5% of contract works amount.

36/49

Is there an interested party involved?

37/49

Please, enter the name and address of your mortgage provider (address: street or PO Box address, Suburb/Town and postcode).

38/49

What is the type of customer, which describes you best?

39/49

Other. Please, describe your type of customer

40/49

What is your postal address?

41/49

Have you or any other member of your family, or any other person or entity to be covered by this insurance in the past 10 years been bankrupt or in the past 2 years had more than 2 losses or made claims totaling more than $2,500?

42/49

Please, provide details bellow

43/49

Have you ever suffered from flooding or landslip at any address relating to this risk: or had any insurance declined, cancelled renewal refused, term or conditions imposed or claim declined or been engaged in any criminal activity or had any criminal convictions, acquittals or have any criminal prosecutions pending?

44/49

Please provide details bellow

45/49

Is there any further information likely to affect this insurance?

46/49

Please provide details bellow

Thank you!

We are going to provide you a quote based on the information you provided to us. Typically within one business day. If you want to talk with us in person please call 0211849007

I look forward to talking to you and to looking after your Insurance needs.

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