'Renovating' your home insurance policy

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"Most home insurance policies require that you insure your home for up to about 80% of its replacement value," says Nolwazi Nzama, Head of Affordable Housing at Standard Bank. "According to experts, renovations raise a home's value by more than 20%. If your renovations make your house a dream home, you may need to raise the amount of your insurance policy to show this change, otherwise, you could be stuck with a big chunk of the bill if a fire or other disaster forces you to make a claim."

While insurance might seem like a hassle to pay for, it can help you save thousands of rands especially when issues arise and you see total costings that you might have had to fork out otherwise.

When renovating, Nzama advises homeowners to consider the following:

1. Homeowner's insurance covers the building materials that will pile up before you begin work. If a fire struck and destroyed both your home and the building materials, you might not be covered for the full extent of the damages unless you have informed the insurance company that you were building.

2. If you hire a contractor, ask him if he has adequate insurance coverage for his workers before the work begins. He should provide proof of insurance in the form of a 'certificate of coverage' in case his workers get hurt on the job. If a worker is injured in your home and the contractor does not carry workers' compensation, you could be sued and your insurance will not cover this cost.

3. Contractors' liability insurance covers the contractor for damage to your property during renovations. If, for example, there's a big hole in an outside wall and the contractor fails to cover it properly during a rainstorm, water could leak in and cause major damage. Though homeowner's insurance will cover these damages, your insurance company will expect the contractor's insurance company to pick up the tab if you make such a claim.

4. For those who would prefer to do renovations themselves, the insurance requirements depend on who's helping you and whether you are paying them for their help. A friend or family member who's injured while lending a hand can have his or her medical bills covered by your homeowner's policy. However, hiring a subcontractor or paying someone to help you makes you an employer, which means you must purchase workers' compensation (workers' insurance) to cover you in case someone gets hurt on your property.

5. Know who is responsible for uninstalled appliances and other items, such as carpets and cabinets, in advance. Your contractor's insurance should cover these items.

It's important to note that very few contractors have contractors' liability insurance or workers' compensation, so you need to get as much coverage from your own insurance company as possible before you start with any renovations.

"While it might be cheaper to use the guy referred by a friend of a friend, getting a reputable and accredited builder will protect customers in the long run and ensure their asset is still of the right and insurable quality, reducing the risk of repudiated claims," concludes Nzama.