Insurance and Structural Warranties
Peter Eade, builder, project manager and author
When you prepare the long list of items needing to be planned before starting your self-build journey, insurance often slips to the bottom of the list.
It may seem boring compared with all the other exciting elements of a new home, but having either no insurance or possibly the wrong type could cause some serious financial problems. You only need to watch the advertisements on television to realise that there are many law firms out there waiting to strike if someone working on your project has an accident.
If you intend to engage a builder to take on the whole project it is their responsibility to carry the correct insurances. These should include: public liability, employer’s liability and, ideally, contract works insurance.
Public liability insurance will cover both legal and compensation costs if someone is injured or possibly has an accident whilst visiting the site. It will also cover any property damage as a result of the builder’s work.
Employer’s liability insurance covers the builder in the event of one of their employees being killed or injured while working on your project.
Contract works insurance covers the cost of redoing any work damaged by fire, flood, vandalism or theft.
As the client it is advisable to ask your builder for evidence of their insurance. Take a look at their insurance certificates and copies of the policies. If your contractor doesn’t have the correct cover then look elsewhere for a more responsible building firm.
If you don’t intend to use a main contractor, but employ individual tradespeople yourself, you will take on responsibility for insurance that would otherwise be provided by a builder.
As a selfbuilder you must consider your role in the project with regard to health and safety legislation and liability. As project manager you will be employing individual trades and will have to comply with the Construction (Design and Management) Regulations 2015, commonly known as CDM 2015.
If you intend to live in the house when it is completed and not sell it on, the Health and Safety Executive will class you as a ‘domestic client’. Check out the HSE website (hse.gov.uk) for the exact definition.
As the project manager and builder, you must have employer’s liability insurance and public liability insurance. Ideally the policies should offer cover for a minimum of £10m.
If you are building an extension onto your existing house, all of the above still applies, but in addition you will need to inform your existing house insurer that you are extending your home.
Having dealt with all of the insurance issues, your next consideration is to arrange a 10-year structural warranty for the project. Mortgage lenders are likely to insist that you have this in place before they release any funds.
A structural warranty provides cover for any structural defects which may arise for up to 10 years after the completion of the build.
How warranties work
You will be required to supply the warranty provider with copies of the Building Regulations approved plans. Once these have been checked and approved the warranty insurance is set up.
The policy is specifically designed to cover the cost of putting right by partial rebuilding or remedial work which is the result of defective design, workmanship or materials.
The policy will also include cover for the unseen parts of the house such as drains and the general weatherproofing of the structure. The warranty process will mean that in addition to having the Building Control inspector monitoring each phase of the construction the warranty provider will also organise regular inspections by their own building surveyor.
If anything should go wrong after the building work is completed and the house is occupied, the warranty provider will arrange to have the fault rectified without the need to involve either the architect or builder.
Before parting with any money it is worth checking the small print so you know what the warranty covers. Generally this relates to major structural issues, and may not include smaller ‘snagging’ problems such as minor cracks in plaster due to the usual shrinkage.
As a benchmark, it is safe to say the more expensive the policy the more comprehensive the cover. Although having a warranty is not mandatory, you will struggle to find a mortgage lender prepared to offer funding for a project that does not have a 10-year warranty in place.
If you are planning to build a house using non-traditional construction methods there are now mortgage providers able to offer funding and several warranty insurance companies can provide the 10-year cover.
One final consideration: it is practically impossible to sell your house within 10 years of completion without a warranty because of the problems acquiring a mortgage on it.