From unreliable contractors and poor safety precautions to inadequate
insurance, too many homeowners overlook renovation risks – a problem
made more urgent by a rise in renovation activity
PHILADELPHIA--(BUSINESS WIRE)--
An increasing number of families in recent years have been investing in
the renovation of their homes, but too many do not fully appreciate the
range of risks involved – from unreliable contractors and worksite
injuries to property loss, lawsuits, and family safety threats. Owners
of high-value, custom-built homes can be especially at risk, and while
many consult with their financial advisors to evaluate affordability and
financing options, far too few turn to their insurance agent to properly
assess the risks. As a result, these families may unwittingly be
vulnerable to significant financial loss and hardship.
These are among the key findings of a new white paper released today by
ACE Private Risk Services, the high net worth personal insurance
business of ACE Group. “Managing Home Renovation Risks for High Net
Worth Homeowners” addresses the three phases of a major home
renovation project – before, during and after construction – from the
standpoint of the respective risks and action steps to mitigate the
process. Please
click here for the full white paper.
“Owners of large, custom-built homes are especially at risk because the
cost of rebuilding the home has a better chance of exceeding the amount
of insurance carried by the contractor,” said Bob Courtemanche, Division
Chairman, ACE Private Risk Services. “In one case, a contractor was at
fault for leaving flammable rags on the job site that spontaneously
ignited and caused the home to burn down. The amount of insurance
carried by the contractor was only one fifth of the cost of rebuilding
the home. That’s why it’s so important to have an agent verify that the
contractor has sufficient liability insurance.”
The increased pace of remodeling activity adds urgency to the task of
educating families and their advisors about the risks. According to
BuildFax, a leading building permit data source, the number of
residential renovations has been rising in recent years, reaching
historical levels similar to those in 2006, the height of the real
estate market. Remodels categorized as “substantial” increased 9.3
percent in 2012 and 10.2 percent in 2013. The number of substantial
remodels in 2014 appears to be on a similar trajectory.
To help homeowners address risk exposures during a major home renovation
project, the ACE Private Risk Services white paper includes a
comprehensive set of recommendations. These best practices include:
Before Construction: The biggest mistake a homeowner can make in
undertaking a major renovation or home addition is to select an inferior
general contractor. So many risks and liabilities emanate from the
general contractor that this decision alone can prove the costliest
error. To sufficiently find and vet a contractor, homeowners should
refer to a trusted network of family advisors, check with state
licensing agencies and the Better Business Bureau, carefully inspect
past job histories, and perform professional background screening.
Furthermore, a homeowner should never act as the general contractor. By
consulting with their insurance agent during the planning stages of the
home renovation, families may also find this is the perfect time to
install new safety systems in their home to guard against theft and
property damage and earn valuable insurance premium discounts.
During Construction: During the home remodeling, assuring
worksite safety for the family, crew and home is the key consideration.
In situations where family members continue to live at the residence
during construction, the risk of theft and other crimes is present, so
families should store their valuables and restrict conversations with
the construction team to the general contractor and project
superintendent. Ensure that all flammable liquids and rags are stored in
approved facilities at a safe distance from the premises, strategically
place ABC-rated fire extinguishers throughout the home, activate the
sprinkler system at all times and protect the home’s contents from the
elements by wrapping the home’s exterior at the end of each day.
After Construction: After a major renovation is completed, the
risk of not having appropriate or enough insurance coverage to address
improvements to the home and new contents exists. The homeowner should
notify the insurance agent to appropriately adjust the amount of
homeowners insurance coverage, which is not as simple as adding the cost
of the project to the previous amount of coverage for the home. While
mass-market insurance companies may offer little guidance in how much to
increase coverage, high net worth market carriers will often send an
expert to the newly improved home to produce a customized estimate of
what it would now take to rebuild it.
The white paper also draws on the insights of industry experts,
including representatives from Cozen O’Connor, The Guidry Group, Hobbs
Inc., J.S. Held, Inc., and an independent architect.
“A major home remodeling project invites complex financial and personal
dangers that require careful examination at all stages of the process
before, during, and after construction,” said Mary Boyd, Division
President, ACE Private Risk Services. “For these reasons, high net worth
homeowners and their financial advisors must collaborate with an
independent insurance agent on the associated risks and mitigating
solutions well before hiring the contractor. The best agents recognize
the myriad of threats and proper insurance coverages needed during the
different phases of the project, and can provide introductions to
specialized insurers with vital services that reduce the prospect of
devastating financial loss and compromised safety.”
About ACE Private Risk Services
ACE Private Risk Services is ACE Group’s high net worth personal
insurance business, which provides specialty coverage for homeowners,
automobile, recreational marine, umbrella liability and collections
insurance for financially successful individuals and families. Policies
are issued by Bankers Standard Insurance Co., ACE Insurance Co. of the
Midwest, and Atlantic Employers Insurance Co. Additional information can
be found at: www.aceprs.com.
ACE Group is one of the world’s largest multiline property and casualty
insurers. With operations in 54 countries, ACE provides commercial and
personal property and casualty insurance, personal accident and
supplemental health insurance, reinsurance, and life insurance to a
diverse group of clients. ACE Limited, the parent company of ACE Group,
is listed on the New York Stock Exchange (NYSE: ACE) and is a component
of the S&P 500 index. Additional information can be found at www.acegroup.com.
Source: ACE Group