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HPH298 : Do I need self build insurance? – with Andrew Reardon

HPH298 : Do I need self build insurance? – with Andrew Reardon

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Andrew Reardon from ProAktive explains the insurance options that are available to anyone carrying out a self build or renovation.

Interview with Andrew Reardon

Andrew Reardon is a Senior Account Handler at ProAktive, a company that specialises in insurance and risk management. He works in the self build department, providing insurance for new builds, renovations and extensions.

Self build insurance has similarities with standard house insurance

It covers many of the same things as traditional house insurance would, such as cover for theft, accidental damage and fire, but also covers you through the construction phase. The biggest difference between the two comes from the types of claims involved. Many of the claims they receive are related to thefts from the construction site, because they don't have the same level of security that a larger developer would have and therefore tend to be targeted. They also receive many public and employer's liability claims, where injuries occur to workers on site, or to members of the public who may have wandered onto it.

Employer's liability and public liability are covered

The employer's liability provides cover for if you are held negligent for an accident that occurs on site. If you have hired a main contractor or have sub-contractors on site, then they should all have their own public liability insurance, but your self build insurance will be a fallback in case that fails or there are any grey areas. It also covers for claims related to casual labourers, or friends and family that might be helping out on the site who wouldn't carry their own public liability insurance.

Check your contractor's insurance cover

Rather than waiting until there's been an incident on site and asking your contractor for their insurance details, it's far better to get that information in advance of starting and steer clear if they can't provide it. Even if you've employed a main contractor to run the job, you're relying on them to make sure they have contract works cover, are keeping up with their payments, and have the right limits to cover the value of your project. If they don't have the correct levels in place then their insurance won't be sufficient, which is when your own cover can provide the fallback.

Theft is by far the most common cause for a claim

Andrew says that they don't have too many claims for accidental or malicious damage, but the most common ones after theft tend to be for damage caused by storms, leaks and frozen pipes.

Theft tends to be of machinery and tools, rather than materials, so quite often a self builder will build the garage or other outbuilding first in order to keep these things more secure.

Other things that can help to reduce the incidence of theft, is to use fencing to keep people off the site, which also helps in terms of public liability, and CCTV if possible. Having a sealed container on site will also help with security, as will keeping deliveries of boilers and kitchen items out of view or away from the site as much as possible until they're installed.

Keep your invoices and receipts safely together

This will help in the event of needing to make a claim, as you will need to provide evidence of your purchase. Having quick access to these will help speed up any claim too. If you don't have a traditional receipt for things like eBay or other second-hand purchases, then make sure you keep copies of emails or take photos of things to prove what you have bought and that they have arrived on the site.

Andrew gives the example of one claim which was for the theft of a £20,000 roof which had only been delivered the previous day. In that case, the delivery driver had tipped someone off that it would be there and unsecured. His advice is to be fully aware of everyone who is on site, and even take note of IDs. Most importantly, secure the items whenever possible, ideally by installing them straight away.

One point to note is that you can only insure things like machinery and tools that belong to you or that you hire in your own name. A contractor or other tradesperson on site will be responsible for insuring their own tools and equipment.

Renovation projects might not be covered under your standard household policy

People often assume that their standard house insurance will cover them throughout a renovation project, but often that's not the case. It may depend on the level of work that is being undertaken at the property, and particularly if the work involved is structural.

Your first step in this situation should be to contact your household insurance provider and advise them of the works to be carried out, to determine what cover they can provide. Your existing standard policy wouldn't cover for the new elements of the work, such as the fixtures, fittings, and materials once they arrive on site, so a policy should be taken out for this. Your existing insurer also would reject a claim for something like a fire caused by a tradesperson on the property, if they haven't been notified in advance of the works.

Carefully consider what your renovation policy needs to cover

The main thing to consider when selecting a policy for a renovation project is that it will cover your existing structure, as it will often be unoccupied during the build. Also notify the insurers of any intrusive work that will be carried out, such as deep excavation or piling which have the potential to cause damage to neighbouring structures. Depending on the nature of this work it can also be worth considering an additional non-negligence cover, which is designed to cover you in circumstances where there is damage to neighbouring structures through no fault of you, your contractor, or architect. It can be quite an expensive policy, depending on the proximity and value of those neighbouring buildings, but definitely worth considering if you're doing intrusive work like retrofitting basements.

The next thing to ensure is that it will cover your fixtures, fittings and materials when they arrive on site.

The employer and public liability elements should have adequate limits, so £10 million is standard for employer's liability, and £5 million is the minimum for public liability. Councils and utility companies generally won't attend unless you have at least that minimum, so it would be pointless to have less than that.

It's worthwhile doing a Schedule of Dilapidation

This is a survey of neighbouring structures which is worth doing if you're going to be carrying out intrusive works that have the potential to cause them damage. Take photos and keep this schedule to show any existing damage to them before you start, to ensure you have proof if these are claimed for later on down the line.

Even keeping photo and video documents of your own progress can be a good idea for if you need to make a claim at any point, such as for total loss due to fire. The more you are able to evidence the better.

The cost of a policy will depend on 3 key criteria

Primarily this will depend on how long you require the policy for, whether it be 9, 12, 18 months or more.

The second factor is the sum that it is being insured for.

And thirdly, the construction type might influence the premiums. A typical brick and block construction would be fine, but something like ICF or SIPs, which insurers might not deem to be a standard construction type, may incur a higher cost.

There may be some projects which insurers will refuse to cover

These would typically be projects of a non-standard construction, which perhaps have combustible elements to them. Particularly since the Grenfell tragedy they have been nervous around projects with polystyrene and wood cladding, forcing self-builders to change their plans or pull out of projects altogether.

Insurance isn't a legal requirement

Although it's not a legal requirement it is something which Andrew wishes people would think about before they even start building. There might be reluctance to take a policy out right at the beginning as people think there won't be many materials and tools around, so it's not necessary. But actually, even at that early stage it's important to have the cover in place for the employer and public liability elements. If left too late into the project, a self builder may find they can't get cover until it's been signed off by building regs, because until that point it won't be considered by a normal household insurer.

Find out more

Visit the website of ProAktive

Check out ProAktive's YouTube channel

Read ProAktive's Guide to Insuring Your Project

Transcript

Download a transcript of the interview with Andrew Reardon

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HPH194 : What are the hidden costs of building a house? – with Paul Testa

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Paul Testa from Paul Testa Architecture talks about how to predict the costs of a house build and shares his tips on limiting a self-build budget.

Interview with Paul Testa

Architect Paul Testa’s interest in construction led to coordinating and teaching the technology course for the MArch in Architecture at Sheffield University. He’s also a tutor and lecturer for the Sustainable Architectural Studies Masters course at Sheffield University. He is a member of AECB (Association for Environment Conscious Building).

Build cost is not necessarily ‘cost per square metre’

Paul aims to help clients gain realistic expectations of their project’s costs. They start by assuming a mid-range, bespoke new-build would cost roughly £1500 a square metre. They then use their cost calculator to add in additional costs, taking into account factors like slope of the site, higher specification and external works.

To price the whole project, Paul says self-builders should include connecting utilities, landscaping, and contingency in the overall build cost. If an architect or builder prices your project at £1500 a square metre, remember this may not include all the costs of the build.

A steeply sloping site

Fees are affected by more than just project size

It is important to have accurate cost predictions for your build and these do not just relate to square metres. Paul explains that the cost of consultants isn’t tied to the size so much as the complexity of the project.

Some costs, such as surveys, might depend on both the size and the complexity of the project. Paul recommends adding 30% to your construction cost for planning and building regulations fees and any other costs. Some of these don’t change with the size of the build, so the fee will be a greater percentage of the build cost for a smaller project.

Utility costs can vary from site to site

Paul has found the cost of connecting gas to be quite consistent, but not so for the electricity supply. The cost can vary hugely depending on the work involved in making your connection, and remains unknown until the application is made. Furthermore, Paul warns that there is no room for negotiation, saying, “It’s a captive market unfortunately.”

“Most contractors won’t have sufficient insurance for the whole project”

Contractors will have insurance to cover their liabilities (public liability and employer’s liability insurance) and potentially for their equipment on site. The architect also needs professional indemnity insurance and public liability insurance to cover the implications of design decisions. Paul advises clients to procure insurance to cover the new building and materials.

Claiming back VAT may depend on your contractor

Some contractors don’t pass on the cost of VAT: the client never sees that cost and the contractor just claims it as part of their quarterly VAT payments. This may be beneficial for clients who don’t have the cash flow to pay upfront for the build plus VAT and then reclaim the VAT later.

Often clients prefer to procure large single ticket items (e.g. windows) themselves, to avoid the contractor’s overheads and profit. In that case, Paul reminds clients they should budget to cover that VAT cost until the end of the project.

Keep back at least 5% of your budget as contingency

To deal with unknowns such as the ground and weather, Paul recommends having “something there to cover you, a minimum of 5% but more generously 10%”.

He warns that stretching both construction budget and contingency “can be quite dangerous.” He advises spending more at the end if you have money left, rather than pushing to do absolutely everything without compromise.

Expert advice during planning helps predict cost more accurately

Although he cannot completely mitigate the risks of unknown costs, Paul ensures that the correct investigations are done as early as possible to try and minimise additional costs. “Certainly on the bigger jobs where there is more scope for value engineering,” he says, “we will try and bring a quantity surveyor or an estimator in at roughly the planning stage.”

This expert can give a budget cost for the build. If it doesn’t fit within a client’s budget, Paul’s team can make changes before the planning application is submitted, avoiding later amendments and resubmissions.

Avoiding the tender process can actually save money

Ideally, Paul likes to find a contractor he wants to work with and that the client is happy with, who will “buy into” achieving the building at the budgeted price. He relies on the expertise of the chosen contractor to ensure that the detailed design matches that budget.

Although Paul acknowledges the benefits and drawbacks of both routes, he doesn’t believe the tender process is the best way of procuring a building, saying “We actually incentivise that in our fees and we charge less for a negotiated price with a contractor than we would do for dealing with a full tender process.”

Contractor availability can be as important as cost

Paul works with a pool of preferred builders, although this can change over time. He explains that the best contractors can be booked up to two years in advance. Although clients might be disappointed by delays, they usually come round. “If they want the very best product, they want the very best people to do that,” he says.

Engaging the contractor earlier in the process can mean that delays are avoided. Having agreed an approximate start date with a contractor, Paul stays in touch while developing drawings, maintaining agreement on budget and timescales. He says, “By the time we’re ready and the contractor’s ready, everything’s drawing together.” However, he adds, “it doesn’t always work that perfectly.”

Tender processes have their own drawbacks. A four to six week process can lead on to reviewing prices, interviews, and value engineering. After all this, the contractor’s availability might be delayed another year. It can be difficult for a client to ignore a much cheaper quote but Paul warns, “Normally, if it’s too good to be true, it probably is.” The project ends up costing as much but with extra difficulties.

A passive house can be built for less than £50,000!

In 2013 Paul’s team submitted a design to the National Self-Build and Custom Build Association’s annual competition ‘Self-build on a Shoestring’. The brief asked for a detached family home, on a very simple flat plot, for £50,000 or less, including all materials and specialist labour but assuming utility connections were already in place.

Paul’s approach was to make “a simple construction that can be built by the average self-builder”. While mainly a “materials only” cost, it included specialist input such as commissioning the MVHR system, certifying the electrics, gas installation and digger and scaffolding hire.

Not only did their design offer a 70m2 family home for around £45,000, it was also designed using the passive house planning package. Paul says, “We delivered a building that achieved passive house for less than £50,000 and would be a compact but very comfortable single family home.”

Delivering build elements constructed off-site to manage costs and time on a steep site

Five top tips to keep build costs to £50,000

  • Remove main contractor: get hands on, do physical work, and do your own project management
  • Reduce risk by choosing a manageable construction method, such as a simple softwood timber frame.
  • Minimise the number of materials.
  • Maximise the function of each element, e.g. exploit oriented strand board (OSB) in three ways: as an airtight layer, internal wall linings and structurally, to stop the building twisting.
  • Choose larger format materials with cheaper production and installation costs, such as fibre cement slates rather than timber cladding.

 

Find out more

Visit the website of Paul Testa

Follow Paul Testa on Twitter

Follow Paul Testa on Facebook

Visit the website of AECB (Association for Environment Conscious Building)

Transcript

Download a transcript of the interview with Paul Testa

 

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