The Naked Truth About Owner Builder Insurance

May 1, 2018 9:53 am Published by 1 Comment

The truth and reality when considering insurance is determining the consequences should something happening during the construction or renovation period.

All too often owner builder’s view insurance as the ‘chances’ of something happening and a potential loss. However, Sam Greco, Principal Qtrust Insurance & Advisory Services, advises owner builders that ‘insurance should be viewed as the financial impact or destruction of family assets should something happen, and importantly if the consequences or loss is greater than you can personally absorb, then insurance is a must’. Insurance is only about an unforeseen incident of event, nothing else matters or plays into the equation.

The naked truth strips away the sales jargon to expose the real cover afforded to owner builders. A fundamental home truth is that no insurance policy covers ‘everything’ and every incident and event. Check any insurance policy for the words ‘NOT EVERYTHING IS COVERED’. Therefore on this pretext what’s “not” covered is just as important as what “is” covered.

Common owner builder insurance information which spins web of misinformation and mistruth about cover. For example.

Insurance firm claim

Naked truth

Contents Cover under a Construction Policy

Firstly and critically important, contents insurance is a prescribed class of insurance, and thereby offers the insured (owner builder) legislative consumer protection and safeguards. Cover under this class is guaranteed. Once an owner builder moves away and enters into a construction policy with contents cover as a sub-set, then consumer protection as outlined above is void. Owner builders should retain or buy Contents insurance from approved retail insurers such as AAMI, YOUI etc
Subcontractors are covered under an owner builder policy‘No’ they are not. Subcontractors are independent entities and required to carry insurances. Their actions and consequences of action maybe covered but the subcontractor themselves are not.
Mitigation ValuesWhen an incident occurs and the owner builder is required to mitigate or take action to further reduce damage, then an allowance is nominated in the policy. In most events these out of pocket expenses are related to (such as) after hour trades call-outs or hiring of equipment such as generators etc. Insurers try pulling wool over owner builders by promoting absurd values that could never be claimed against for example $50,000 for out of pocket expenses! Which owner builders have credit card limits of $50,000?
Goods in TransitCan only be called upon if no other insurance is available such a car insurance, shipping or transit insurance, CTP or at fault insurance.
Increased cost of workingsSome underwriters interchange this cover with Escalation Costs. Both these terms have very different definitions, they are not interchangeable. Owner builders are better off with Escalation Costs Allowances because it directly relates to the cost of rebuilding or reinstating lost property.
Maintenance periodNo imaginable scenario can trigger this condition.
Pre-existing property coverSome insurance policies cover damage to existing structures only which arises out of the contract works. What if damage is sustained not related to contract works?
Multi underwriters to one policy. For example when an insurer is unknown or no brand, (often Head Office and Claims management located off shore) insurance is broken up into multi elements but sold to owner builders as one policy.No single point of claims management.

Multi insurance company fees

Multi re-insurance management costs

Which insurance company is responsible to settle your claim?

How much in fees are actually paid?

Foreign insurers dressed to appear Australian. The cost of insurance is determined by an insurers calculation of probability that an actual claim will be made. An insurers inexperienced or unawareness of detailed owner builder risks either under-price the quote and therefore run the risk of making a loss and not paying or significantly making it difficult to claim, or over-price, hoping it makes a profit.

Insurers often don’t trust their own calculations and numbers, and often offset their ‘bets’ through re-insuring your project through other insurers. In other words, take out insurance on their insurance! All this activity erodes an insurance company’s confidence in costings and financial calculation and ultimately profits which pays out claims. Australia’s owner builder segment is a narrow insurance niche generating in excess of 1,000 new policies each month. In such confined markets, insurers must accurately detail their products and pricing. ‘This is the real importance of arranging insurance through trusted and experienced organisations’, says Anne Renshaw of Qtust Insurance & Advisory, ‘because just like experienced commercial insurance buyers who always select an insurer before an insurance policy, owner builders should only arrange insurance through quality insurers. The quality of insurer determines and guarantees the quality of insurance’.

Owner builders in most instances are not experienced commercial insurance buyers. Contract works and construction public liability insurances is commercial grade, placing owner builders at a disadvantage.

5 easy and quick question to ask before choosing your insurance provider.

Who is the underwriter?

 

Clarify who is the actual insurer or insurers. Search Google to confirm their Australian connection and commitment through a quick check of their Board of Directors – only Australian insurers employ Australian board members
Where are claims assessed and settled?Most foreign insurers in this class of insurance outsource claims management. This centralised approach may be adequate if real time response and actions are not required or not urgent
Separate the sales spin from the insurer and the sales personA quality owner builder insurance policy type is classed as ‘all risk’ cover. This means the policy can only exclude risks that have been specifically referred to, in the schedule of insurance and product disclosure statement.

It costs no more to purchase these types of policies but the benefits are far superior to alternatives.

How many owner builder clients have taken insurance with the underwriter? (owner builder sector clients only)Qtrust Team has serviced and insured tens of thousands of Australian owner builders in recent years. The importance of this question is to ensure an insurers ‘sinking fund or resources of resources’ is adequate to pay your claim fast
Clarify fees which will apply. Reinsurance fees, foreign exchange fees, underwriter fees, credit card fees etc?The greater the fees the less amount of money is allocated to claims management. To an owner builder these cost practices translates into an insurance firms greater propensity to try discounting any claims payments from you

 

In recent years the Qtrust team has serviced and insured tens of thousands owner builders customers. No other insurance firm matches this depth of experience, owner building understanding, industry competency or track record. None!

When the price is cheap, the quality of insurance is invariably cheaper.

Disclaimer
While we make every effort to ensure the accuracy of our information, Qamvis Insurance Group accepts no responsibility for the accuracy of the content. No formal or informal guarantees are implied. The information that we publish has been prepared from a wide variety of sources that we believe to be credible. However, Qamvis Insurance Group makes no representation and takes no responsibility as to the accuracy or completeness of any information on this website or in the publication

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This post was written by Technical Underwriting Centre

1 Comment

  • warren_sp says:

    Would you please email a copy of the full policy. It remains unclear whether theft and burglary is included in the policy and whether in-fill non load bearing strawbale construction for walls is covered.

    Reply:
    Theft and burglary is an integral element of this policy. The circumstances of these events may impact excess provisions, but not cover.
    This Policy is designed to protect you from physical loss or damage to the construction works, including either repair, replace or reinstate your loss always within the terms and conditions of the policy of course, this includes construction materials .
    The total sum insured valued you nominated was $8400,000 plus the added no cost reinstalment allowances, noted in your quote.
    Let me know if I am in need to further clarify

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