Do I need home insurance for renovations?

Most home insurance policies are intended to cover standard risks to a property. A renovation project can introduce a plethora of new risks, from damage to the property, to personal injury to the home’s inhabitants or tradespeople. Building sites can also be attractive targets for thieves, so you may want to confirm that your insurance covers the risk of theft during your home renovation, for your own peace of mind.

Because of the extra risks involved with renovating, some insurers may exclude renovation projects from their regular home insurance cover. Others may still offer the cover, but only up to a predefined limit for the renovation project’s budget, such as $50,000 or $100,000. Check your policy’s Product Disclosure Statement (PDS) to find out exactly how much cover may be available to you.

Consider speaking to your insurance company before starting the renovation, as policies may become void if you fail to do so. This means that if anything goes wrong during the renovation, the damages will not be covered by your home insurance policy.

If renovations aren’t covered under your current home insurance policy, you may be able to take out additional cover by paying an extra premium. If your insurance company doesn’t provide the cover, you could consider cover from another insurer.

Under a comprehensive home insurance policy, damage caused by a contractor should be covered, though you should always check with the insurer to be certain. 

If you’ve hired builders or other tradespeople to take care of your renovation project, these workers should be covered by their own insurance policy, sometimes called builder’s insurance or tradie’s insurance. This is often a legal requirement for projects over a certain budget, which varies in different states and territories. The builder’s insurance covers financial expenses resulting from any damage caused to your home while renovating.

Damage to your home will generally be covered by the builder’s insurance; however, it may be limited to only those areas that are being renovated. Some insurers extend builder’s insurance for the entire home, which can be a replacement for home and contents insurance while renovating. But to extend the builder’s insurance cover, you may have to pay additional fees.

Before hiring builders for a renovation project, it may be worth asking about their insurance, including what’s covered and what’s excluded.

Keep in mind that if a builder can’t complete the renovation work on your home, such as if they become insolvent or lose their licence, you may be covered under your state or territory’s home warranty insurance - check with your state or territory government to learn more. 

Minor renovation projects may already be covered under your standard home insurance policy.

Small modifications like fixing a bathroom or changing the partition wall do not significantly alter your home's structure, so these works are sometimes covered under a standard home insurance policy.

It’s important to check whether renovations compromise your home’s safety, as this can sometimes determine whether coverage is provided.

Insurance for homes under renovation can be more complex if you’re looking at larger projects.

Insurers may be wary of providing home insurance during a major renovation due to the higher risk of accidents or home damage, and because your home may be unoccupied for a long period. If you move out of home during the renovation work and the home remains vacant for more than the insurer’s maximum length of time (e.g. 60 days), the policy’s benefits may lapse.

If you plan to do the renovation work yourself as an owner-builder, your home and contents insurance may not be adequate. You may need builder's insurance in addition to the standard policy - this may be a legal requirement in your state or territory if the renovation’s cost is above a minimum amount. If you hire extra contractors and subcontractors, you may want to make sure they have builder's insurance too. 

Completing a major renovation project, such as adding extra rooms or storeys, can often affect a property’s value. As the cost of rebuilding the property may increase significantly, you may need to lift the sum insured for the home and contents insurance policy to ensure you get an appropriate payout if disaster was to strike in the future.

At the same time, you could organise your own property valuation to get a better idea of how much equity you now hold in the renovated property. This could open more financial decisions up to you, such as refinancing your home loan or applying for a home equity loan.

It is the Australian standard that you should hear back from an insurer within 10 working days from making an insurance claim. They may accept your claim, reject it, or ask for more information to make a thorough assessment. Once the insurer has all the information they need, a final decision should be available in 10 business days. 

If your policy has a high excess, you may need to pay for part of the repair work yourself, possibly using the same finance source as your renovation budget. This could be from refinancing and extending your home loan, or taking out a home equity loan to borrow as you need it. Some home renovations are funded using a personal loan or even a credit card.

The insurer may be able to organise tradies from their own network to take care of any necessary repairs following a renovation accident. Alternatively, you may be able to choose your own repairer, and have the insurer pay you the fair and reasonable amount that the repairs should cost.

In any case, it’s important to keep careful records of whatever you spend on your renovation and on fixing any damage that occurs during the project, as the insurer will likely want to know the details before they’ll cover it.