Renovating Tips: Are You Insured?
Renovating your home is one of the best and most popular ways to enhance your lifestyle, breathe new life into old spaces, and add value to your sale price. Despite our hopes for the best, sometimes renovations don’t end up as planned.
Structural issues, labour shortages, material cost blowouts, and simple “changes of mind” can add thousands, if not tens of thousands to the cost of your renovation. Also, accidents and disasters can strike which can take a half-finished renovation back to square one. If you aren’t insured for it, it can put a massive strain on your finances.
Here are some renovation tips to help you through the process and avoid the common pitfalls and problems DIY renovators or those looking to get the professionals in on a budget encounter.
Renovations on a budget
Though there’s no shortage of renovation and design shows, many of them embellish what type of renovation is actually happening on screen. Some cosmetic renovations such as replacing cabinets in a kitchen or putting in new tiles for a bathroom are known as partial renovations. Renovations where one knocks down walls or rearranges fixtures are known as structural or total renovations. These renovations, depending on your need, can cost tens of thousands of dollars. Many partial or cosmetic renovations, like painting walls, you can easily do yourself with a bit of knowhow from YouTube or websites. Structural renovations will need a qualified builder or tradesperson to complete.
Get a design and budget formalised
Having a lack of direction – or hoping for the best – can often lead even the most well-intentioned renovation astray. If you need help from an interior designer or contractor to cement your ideas into real plans, they are well worth the money instead of hoping for the best.
Get formal quotes from three or more builders, and make sure you understand what is and is not included in these estimates. Aim for 45–50% of material expenses, 30–35% of labour, and 20–25% of fees, taxes, GST, and levies in your budget. Don’t forget to factor in additional costs for council permissions and storage. Even if you have a skip bin in front of your property, most councils and shires will need to grant you permission, for example. Other councils may be more “aggressive” than others when it comes to proposed renovations, so always check before you start.
Doing all this will ensure there is a straight path from beginning to completion for your renovation instead of changing your mind or adding on bits and pieces halfway through, which can blow your budget out completely.
How to finance your renovation
Financing your renovation is another matter. Some may opt to pay for it using savings or their home equity – though this can be tempting and convenient, it may lead to shortcomings in available cash or paying back sums with higher interest rates relative to the size of the project. One way to ensure you are paying as little interest as possible is to take out a personal loan to cover the project and pay it off over time. You may be surprised how much interest you will save compared to an equity release. Talk to your lender or bank first to do the calculations before making a commitment.
The insurance situation – are you covered?
When doing any sort of work on your property, you must ensure your property is adequately covered by insurance.
In New South Wales, the Home Building Compensation Fund coverage serves as a safety net for homeowners, protecting them against financial loss resulting from incomplete or shoddy work completed by a builder or tradesperson who vanishes, passes away, gets bankrupt, or has their licence revoked.
Licenced builders should have their own public liability and construction insurance. However, during renovations, your home and contents insurance may not cover intentional “damage” (e.g., you swing a mallet too hard and break something valuable in the course of renovation) or theft from an open building site.
In most cases, you will need to inform your insurer that you are undertaking works to your home. At the very least they will need to re-assess your policy as renovations will mean a higher market value. Some insurers have begun to offer “works” or “renovation” insurance as a stop-gap between whatever your builder’s insurance covers and what your home and contents policy does not.
If you’re ever unsure, ask an insurance broker or legal expert to see where you stand when it comes to insuring your renovation – at the very least, it’ll give you peace of mind.