Do I need to tell my home insurer before renovating?

Why your insurer needs to know first

A renovation can change the risk your insurer agreed to cover. Trades are on site, parts of the house are opened up and materials are stored on the block. The NSW Government's guidance on insurance when renovating asks owners to notify their home insurer in writing before construction starts. It warns that an owner who does not inform the insurer before work begins may sometimes not be covered at all. It also suggests checking with your insurer or broker before you sign the building contract.

Policies differ, so the answer for your home sits in your own policy. Moneysmart, run by ASIC, suggests reading the product disclosure statement for exclusions, caps, limits and special conditions. If you are borrowing for the renovation, the NSW guidance notes that your lender will want to see a current certificate of insurance.

What your builder insures and what you insure

Under clause 22 of the NSW Government's home building contract for work over $20,000, the contractor must hold public liability cover of at least $5 million until completion. It must also insure the work itself, including work in progress, temporary work and materials on site. That cover is for the full cost of reinstatement plus at least 10% for debris removal, demolition and consultants' fees. Your interest as owner must be noted on the policy and the contractor has to give you certificates of currency before work starts.

The builder's policy is for the building work. The contract's own note tells owners to check with their insurer whether the builder's cover is adequate. The NSW guidance also recommends keeping your own home and contents policy in place. Home building compensation cover is different again, since it protects you if the builder dies, disappears or becomes insolvent. Our guide to home warranty insurance in NSW explains how that cover works.

Questions to ask your insurer before work starts

• Does the policy cover the house, its contents and the parts being kept while building work is under way?
• What do you need from me in writing and by when?
• If we move out during the work, is the home treated as unoccupied and does that change the cover?
• Are damage or theft during construction covered and do any conditions or exclusions apply?
• Will the sum insured need to rise once the renovation is finished?

Update your cover when the work is done

Finished work raises the cost of rebuilding your home. Moneysmart warns that a new kitchen, deck or extension can increase the rebuild cost and that not updating your policy after renovations is a common cause of underinsurance. Most policies have an averaging clause that applies when cover falls below about 80% to 90% of the real rebuild cost, which reduces what the insurer pays on any claim. Moneysmart also lists demolition, site clean up, asbestos removal, council fees and architect services as costs to include in the sum insured.

How we plan a renovation at SHORE

Before work starts on a renovation, we resolve staging, access, temporary works, long-lead selections and protection for the parts of the house being kept. Those details describe what will happen to your home during the build, so they are useful to have in hand when you speak to your insurer. Our guide to planning a luxury renovation covers the contract protections that apply in NSW. To see how we carry a renovation from the existing house to the first year in it, explore our luxury home renovations in Sydney.