Owner Builder Insurance
Owner Builder Insurance
The Insurance you need when you renovate or build a new home as an owner builder.
This insurance protects your project, your public liability to others and optionally can also protect any existing property.
What is owner builder insurance?
Owner builder insurance is a type of insurance policy that protects homeowners who are undertaking construction or renovation projects on their own property. It provides coverage for damage to the property during the construction period against a range of risks, including property damage caused by fire, theft, or natural disasters etc.
It also provides protection against liability claims as a result of damage to someone else’s property or causing an injury to others. This insurance is essential for owner builders because they are not covered by the standard homeowner’s insurance policy.
By having owner builder insurance, owner builders can have peace of mind knowing they are protected financially if something goes wrong during the construction or renovation process.
Why is owner builder insurance important?
Owner builder insurance is crucial because it provides protection for the owner builder during the construction process. There are two components parts of this insurance policy:
- Material Damage – This is to protect you against loss or damage to your project as a result of an insured event like, fire, theft, storm etc. Example: You had the building frame up and a freak storm dropped a large gum tree from the neighbour’s backyard on your frame cuasing a serious damage. Now the trusses are broken, the walls collapsed causing a $40000 loss but carpenters need to come and re do the work and the cost has gone up.
- Public Liability – Incase your work results in damage to someone else’s property or causes an injury to a third party and they sued you for damages, the public liability component of the policy comes in handy. Example: The slab of the house is getting poured and the concrete gets splattered on the neighbours car in their driveway. They demand money! – True Story.
With owner builder insurance, the financial risk associated with such scenarios can be managed effectively by passing the risk on to an insurer.
Cost of owner builder insurance
The cost of owner builder insurance depends on several factors.
- Firstly, the value of the property being built affects the premium. A higher value property will typically result in a higher insurance premium.
- The duration of your project
- Whether any existing property also needs cover whilst the new build is happening like an extension.
- The type of construction being undertaken is also important. Certain types of construction, such as building with unconventional materials or in high-risk areas, may lead to increased premiums.
- Additionally, the level of coverage desired by the owner builder will impact the overall cost.
Owner Builder – Pros and Cons
Below are listed some of the advantages and disadvantages of being an owner builder.
| Pros (Advantages) of Being an Owner Builder | Cons (Risks) of Being an Owner Builder |
|---|---|
| 1. Cost Savings: Owner builders can potentially save on labour costs and builder’s profit margins by doing the work themselves. | 1. Time-Consuming: Managing a construction project can be time-intensive, taking away from other personal and work commitments. |
| 2. Control: Owner builders have complete control over the design, quality, and materials used in the project. | 2. Legal and Regulatory Responsibilities: Owner builders are responsible for complying with building codes and regulations, which can be complex and subject to change. |
| 3. Customization: Owner builders can customise their home or project to suit their unique preferences and needs. | 3. Financial Risk: If not adequately insured or if issues arise, owner builders may bear significant financial risks for defects, injuries, or delays. |
| 4. Potential for Equity: Successful owner building can increase the equity in the property and potentially lead to higher resale value. | 4. Limited Experience: Lack of construction experience can lead to mistakes, delays, and potential quality issues. |
| 5. Learning Experience: Owner building can be a valuable learning experience for those interested in construction or real estate. | 5. Insurance Costs: Insurance premiums, such as Home Warranty Insurance, can be costly and add to the overall project expenses. |
| 6. Flexibility: Owner builders can choose their construction schedule, allowing for flexibility in timing and project phases. | 6. Limited Availability of Financing: Some lenders may be hesitant to provide loans to owner builders, limiting financial options. |
| 7. Sweat Equity: By contributing their labour, owner builders can build equity in the project without significant cash outlays. | 7. Project Management Challenges: Coordinating subcontractors, materials, and timelines can be challenging without prior experience, particularly if you are time poor or have an inflexible job or work. |
| 8. Lower Overhead: Owner builders may avoid builder’s overhead and profit margins, potentially reducing overall project costs. | 8. Legal Liability: Owner builders are personally liable for construction-related accidents or issues, which can have legal and financial consequences. |
| 9. Personal Satisfaction: Completing a project as an owner builder can provide a sense of accomplishment and personal satisfaction. | 9. Stress and Pressure: Owner builders may face stress, pressure, and sleepless nights, especially when dealing with unexpected issues or delays. |
| 10. Potential for Future Projects: Successful owner building can lead to opportunities for future construction or real estate endeavours. | 10. Risk of Overcapitalization: Investing too much in the project can lead to overcapitalization, making it challenging to recoup costs if selling the property. |
Owner Builder Case Study
So you are considering to be an owner builder or perhaps you have already decided to be one, taken some steps, set the wheels in motion, and looking forward to taking on the challenge.
Anxious and excited at the same time?
I can understand and relate to it because I am building a house myself as we speak write.
I notice the anxiety comes from the unknown elements that you may encounter during the build.
There are bound to be some because, firstly, if you are not a builder by trade and may not be entirely sure of the process, the sequence and order of steps that need to be taken to complete the build.
Secondly, there will be things that do not go to plan and you’d have to figure out what to do. This happens to seasoned builders also however they perhaps have the work experience on their side which reduces their anxiety not because they know exactly what to do in a tricky situation but they know that most tricky situations can be resolved with a bit of expert advice and some cash.
Whatever your reason maybe to become an owner builder whether it is trying to save construction costs, build your dream home that others would have charged a fortune for or simply the satisfaction of having built your own home, I can say in the end the process is going to be rewarding. Although I haven’t yet got to the end yet but having spoken to some people who have embarked on this journey before us.
For the record, we commenced our build in 2023, the year when domestic builders in Australia were going bankrupt on a daily basis and there was no way I was trusting any builder with a $50K deposit only to know they have vanished in thin air. There is a lot we will be sharing over the coming weeks.
Welcome to our page and let us take you on our short journey of building a simple but much loved home. We are based in Victoria and the very first thing we needed to do was getting an owner builder permit from the Victorian Building Authority.
How to be an owner builder in Victoria
How to be an Owner Builder in Victoria? Is that a question on your mind. Any one considering to become an owner builder in Victoria should start with the – Victorian Building Authority’s website. Starting at this place will ensure …