Major works are aptly named. They often involve significant renovations or repairs such as roof replacements, structural alterations, or extensive refurbishments. They’re complex and costly, but necessary for the integrity of the building.
Leaseholders must have their say in any major works via the Section 20 process. But how much do leaseholders know about the implications of major works on their insurance? Here we’ll be outlining the potential impact on insurance premiums, how to make sure you’re adequately covered during and after any major works, and how to handle the claims process effectively.
Insurance Coverage
For most leaseholders, the job of sourcing and arranging insurance is left to a managing agent or landlord. But making sure you’re asking for information re your current and future coverage is an important part of protecting your own, personal investment.
Adequate insurance is always vital, but making sure you’re adequately covered during and after major works is of the upmost importance. In addition to your usual coverage, you may need some additional policies in place during major works:
- Contract Works Insurance
This covers any loss or damage to the property during the renovation or repair. It’s vital for safeguarding against unforeseen incidents during the construction period.
- Public Liability Insurance
This protects against claims for injury or damage to third parties. Contractors often have their own public liability insurance, but it’s wise for property owners to have this cover too.
- Professional Indemnity Insurance
If professionals such as architects or surveyors are involved, this insurance covers any legal costs and claims for negligence or errors in their work.
- Contents Insurance
As a leaseholder living in a unit during the works, or even just storing belongings on site while work is completed, this insurance covers your personal possessions against theft, loss, or damage. It’s wise to have this in place at all times, but becomes even more necessary during major works.
Potential Impact on Premiums
With additional policies comes additional cost. You can expect your service charge to increase to cover the additional premiums and you may wish to pay for your own contents insurance too.
In terms of your standard buildings insurance, this premium may also increase due to:
- Increased risk
During renovations, the risk of damage or accidents increases. Insurers may raise premiums to reflect this higher risk. Property managers and landlords can control this increase by evidencing their mitigating processes.
- Temporary cover adjustments
Insurers may need to add to an existing policy to ensure adequate coverage. This additional cover will last for the duration of the works.
- Higher value post renovation
Post-renovation, the value of the property may well increase. A higher-value property typically means higher insurance premiums.
Ensuring Adequate Coverage
To ensure you have adequate coverage during and after major works, your landlord or letting agent (or you, with regards to contents insurance) should follow these steps:
- Review existing policies: Before starting any work, review your existing insurance policies to ensure they cover the scope of the planned works.
- Communicate with your insurers: Inform your insurers about the planned renovations. They can advise on necessary adjustments to your coverage.
- Get written agreements from your insurer: Ensure any additional cover or changes in policies are documented in writing. This prevents misunderstandings and provides clear terms for both parties.
- Post-completion review: Once the works are completed, reassess your insurance needs. Update your policies to reflect the changes in the property’s value and condition.
The Claims Process
If you or your landlord need to make a claim during major works, it’s likely to be during a stressful situation. Preparing for this eventuality can reduce the amount of stress and ensure that the claims is processed smoothly.
Ensure that your managing agent or landlord is keeping detailed records of the work. This includes contracts, receipts, photos of before, during and after the works, invoices, email exchanges etc. If you receive any correspondence regarding the works, keep a diligent paper trail- and take photos of your unit before during and after the works too. Insurers may well ask to see evidence.
It’s also wise to assume that insurers will need to opinion of a specialist third party before paying out. Keeping some funds in the budget for site visits and inspections by surveyors and legal professionals is a good idea to save additional expense.
If a claim becomes necessary, make the call as soon as practicable. Delayed reports make for a lengthier, more complicated process.
Summary
Major works to leasehold properties can have significant insurance implications. Having the right insurance coverage is crucial to protect your investment and manage any risks. Review your insurance policies, communicate with your insurers, and ensure you have adequate coverage before, during, and after the renovations. By understanding the insurance implications, leaseholders can better prepare for major works and protect their property effectively.
