Do You Need Renovation Insurance?

“The builder’s insured, so we’re covered” is one of the more comforting assumptions a homeowner can make before a renovation starts, and one of the more incomplete.

A contractor’s insurance can matter enormously if something goes wrong, but it does not automatically create a single protective umbrella over the house, the building work, the materials waiting to be fitted and every accident that might happen between demolition and completion. A builder’s public liability insurance, your existing buildings policy and insurance covering the works are doing different jobs — and whether they fit together properly can depend as much on the building contract as on the name printed at the top of each policy.

Working that out before the roof comes off is a genuinely small amount of effort compared with trying to establish afterwards which insurer was supposed to cover a loss.

The exact arrangement varies from project to project. “Renovation insurance” is not one standardised policy with identical cover from every insurer; it is a convenient description for specialist cover designed around properties undergoing building work. The useful question is therefore not simply whether somebody has bought a policy bearing that name, but whether the existing building, the works, materials and relevant liabilities are actually insured in a way that matches the project.

Tell your existing insurer before significant work starts

Standard home insurance is written primarily around a house in ordinary residential use. Renovation changes that risk. Walls may be opened, security weakened, plumbing altered, temporary electrics introduced, combustible materials brought onto site and parts of the building exposed to weather. If the household moves out while work is under way, another set of policy conditions may come into play.

Significant building work should therefore be raised with the existing insurer before it begins rather than after a claim. MoneyHelper advises policyholders to tell their insurer about changes such as building work and to make sure the level of cover remains appropriate.

That does not mean every new kitchen worktop or weekend of decorating requires specialist renovation insurance. The issue is what is being done and how materially it changes the risk. Extensions, loft conversions, structural alterations, major internal strip-outs and substantial roofing work are very different propositions from ordinary maintenance.

Once notified, the insurer might continue the existing cover, impose additional conditions, restrict certain risks, charge an additional premium or decide that the proposed work falls outside what it is prepared to insure. Finding that out before construction begins shows whether there is actually a gap to fill.

Leaseholders need an additional check because the buildings policy may be arranged by the freeholder or management company rather than by the individual flat owner. A landlord renovating between tenancies likewise needs to check the landlord policy rather than assuming owner-occupier insurance principles transfer automatically.

Public liability can protect your property — but not in the way many homeowners assume

A homeowner’s house is normally third-party property from the contractor’s point of view. If a builder negligently damages it and becomes legally liable for that damage, their public liability insurance may respond, depending on the policy and the contractual arrangements.

That makes public liability important. It still does not make it first-party insurance of your house or renovation.

A public liability claim usually depends on the contractor being legally liable for what happened. It is not a policy that simply pays whenever fire, water, theft or another loss occurs during the project. Nor should a headline certificate saying “£5 million public liability” be taken as proof that every form of accidental damage to the house is covered.

One particularly useful question is whether the policy restricts damage to the property, or part of the property, being worked on. Liability policies can distinguish between accidental damage caused to surrounding property and the element of the building on which the contractor was actually carrying out work. That detail can matter far more after a loss than the impressive-looking liability limit on the insurance certificate.

The same principle applies when asking what else the contractor carries. Is there contract works or contractors’ all-risks insurance? What value is insured? Does it cover materials waiting to be incorporated into the job? How long does it run? And does the insurance arrangement protect only the contractor’s financial interest, or has the homeowner’s interest been properly dealt with too?

“The builder is fully insured” is therefore the beginning of the conversation, not the end of it.

The building contract matters too

A renovation creates at least two distinct things that may need protecting: the existing building and the new works being carried out to it. Somebody needs to carry the insurance risk for each.

That responsibility can fall differently depending on the contract and what insurance is available. The homeowner may continue to insure the existing structure while the contractor insures the works; other arrangements can involve joint names or specialist policies. Current JCT Minor Works 2024 documentation reflects that distinction by dealing separately with contractor liability, insurance of the works and insurance arrangements involving existing structures.

This matters particularly on extensions and refurbishment projects. A £70,000 extension attached to a house with a £500,000 rebuilding cost creates a very different exposure from £70,000 of work being carried out on an empty site. Insurance of the new work alone does not answer what happens if an incident associated with the project causes serious damage to the much more valuable house already standing beside it.

Specialist renovation or site insurance can sometimes provide the coordinated solution. On other projects the existing household policy and contractor’s insurance may fit together adequately. What matters is that the answer has been established rather than assumed.

Insurance should not be mistaken for a workmanship guarantee either. The cost of correcting defective work can be treated differently from consequential damage caused by that defect. A badly fitted pipe that subsequently floods a room, for example, raises different questions about the faulty pipework and the resulting water damage. Where an architect, engineer, contractor or other consultant carries design responsibility, professional indemnity insurance may also become relevant because a design error is a different exposure from ordinary contracting liability.

The point is not to assemble as many policies as possible. It is to understand who carries each significant risk before the contract is signed and work begins.

Rebuild cost is not the same as market value

A renovation is also a sensible point at which to revisit the amount for which the existing building is insured.

Rebuild or reinstatement cost is different from market value. It is concerned with what it would cost to reconstruct the physical building after a serious insured loss, allowing for matters such as demolition, site clearance, labour, materials and professional fees. Market value reflects what somebody might pay to own the property and therefore includes factors such as location and land value.

An extension obviously increases the amount of building that would need to be reconstructed. Other substantial renovations can change specification, services or construction sufficiently to affect the appropriate figure too. A long-standing sum insured should not therefore be assumed automatically to remain correct after major work.

For relatively conventional homes, the BCIS rebuilding-cost service provides a useful starting point for estimating residential reinstatement cost. Listed buildings, unusual construction and properties where standard assumptions plainly do not fit can justify a professional reinstatement-cost assessment instead.

Underinsurance matters because some policies contain an average clause. Where one applies, a materially understated rebuild value can result in a claim being reduced proportionately rather than merely limiting payment in the event of a complete loss.

But that is not an automatic rule applying identically to every home-insurance claim. The Financial Ombudsman Service’s guidance on underinsurance makes clear that the policy wording, the information the insurer requested and the fairness of applying an average clause all matter.

The useful conclusion is simpler than the insurance mechanics behind it: if the insurer asks for a rebuilding figure, do not substitute the property’s purchase price or an estimate of what it would sell for.

Unoccupied properties carry another risk

Extensive renovation often means the household moves elsewhere temporarily. That can change the insurance position again.

Home-insurance policies commonly impose additional conditions or restrictions once a property has been unoccupied for a specified period. MoneyHelper’s guidance on buildings insurance notes that insurers commonly need to be told when a home will be empty for an extended period, often around 30 days or more, although the exact threshold and requirements depend on the policy.

The important point is the insurer’s definition of unoccupied. A homeowner should not assume that inspecting the builders every few days, leaving furniture inside or occasionally spending a night at the property necessarily means it remains occupied for insurance purposes.

That distinction matters during renovation because the risks genuinely change. An escape of water can run unnoticed for much longer in an empty house; temporary security may be weaker; materials and fittings can attract theft; and damage may not be discovered as quickly as it would be in a normally occupied home.

The relevant threshold should therefore be checked against the project’s realistic programme before the household relocates, not after the nominal completion date has already slipped.

Before the roof comes off

The most useful way to approach renovation insurance is not to begin by shopping for something called “renovation cover”. Begin with the risks and establish where each one is actually insured.

Tell the existing buildings insurer exactly what is proposed, when work is expected to start, how long it is likely to last and whether the property will remain occupied. Confirm what cover continues during the work and get any material restrictions or changes recorded in writing. Establish precisely what insurance the contractor carries, including any restriction relating to the part of the property being worked on, and make sure the building contract and insurance arrangements agree on who is responsible for the existing structure and the new works.

If that exercise exposes a gap, specialist renovation or site insurance becomes meaningful rather than simply another policy bought because the name sounds appropriate.

Substantial work is also the time to reconsider the property’s rebuild cost and to test the project programme against any unoccupancy limits. A renovation expected to last three months can easily become six, and insurance terms do not necessarily move with the builder’s revised completion date.

None of this makes renovation inherently difficult to insure. What creates the danger is the assumption that somebody else’s policy must be covering a risk simply because somebody else has insurance.

“The builder’s insured” is useful information. Before a serious renovation begins, it just isn’t enough information.

Important: This article provides general property and insurance information, not personalised insurance advice or a recommendation of a particular insurance product. Policy terms, exclusions, excesses, definitions of unoccupancy and contractual insurance responsibilities vary considerably. Confirm the position for your project with the relevant insurer or an appropriately qualified insurance broker before work starts, particularly for major structural projects, leasehold property, listed buildings and non-standard construction.