Your insurance risk begins with how secure your home is. If you're fixing a bathroom, for example, you're unlikely to be tearing at any of the external structure of your house. So if your doors and windows all still lock, it's likely that your insurance will still stand.
Just be aware that no matter the size of a renovation, most insurers have exclusions for water damage that occurs during or as a result of the job.
But what about bigger, longer jobs, where most or all of the house is part of the build? Construction sites can be magnets for thieves and vandals, making it an unappealing option for home and content insurers. Some will suspend your cover if the property isn't secured, or if the renovation is worth over a certain amount. And if you decide to live elsewhere for the duration of the build, your insurers occupancy clause might kick in. But that doesn't mean you don't have options.
A licensed builder should have construction (aka contract works) insurance as part of their business' cover. By default this will only cover the part of the structure they're working on. Some insurers give the option of extending coverage to the whole building, meaning it can work as a replacement for home insurance for the duration of the build.
But what about your contents? We've heard anecdotal reports of builders being able to get their clients' home contents included in their contract works insurance, although we haven't been able to find an insurer who openly advertises this service. In any case, having your belongings insured with a policy in another person's name might be a risky proposition.
Recently a few building industry insurers have begun offering "renovators" home and contents insurance. Some are geared toward owner-builders, others to those using a contractor. These policies are advertised as temporary full replacements of your usual home and contents policy.
It looks like they might fill the gaping hole in home and contents insurance. But they haven't been around long enough for us to judge whether they are good value, or just another insurance industry lemon. For the time being, it's a case of buyer beware.
Things you can do
- Talk to your builder about their professional insurance. Ask them if their contract works insurance covers the whole structure, or just the part they're working on – it might be worth paying a bit more for them to get coverage for the whole building.
- Call your home and contents insurer before building work starts. In most cases you have a contractual duty to tell them about any major renovations or if the home is going to be unoccupied for an extended period of time.
- See what your insurer's policy is on renovations, and ask what cover they will offer (possibly at a higher premium). If they aren't going to cover you, tell them to suspend your premium payments for the duration of the build. If they don't, dump them: it's no use paying for nothing.
- If possible, try to arrange the build schedule so that the external entrances are unsecured for as short a time as possible.
- Consider moving some of your belongings into storage for the duration of the build. If you aren't going to be covered for contents, think about whether small, valuable items really need to be in the house at all.
- Before buying any new insurance product, always read the PDS and make sure you understand what you're covered for – and what you aren't.