Many homeowners under-appreciating construction risks, even as renovation projects rise: ACE

Too many homeowners don’t fully appreciate the risks involved with undertaking renovations to their homes, notes a new whitepaper out of the United States from ACE Private Risk Services.

The report, Managing Home Renovation Risks for High Net Worth Homeowners, outlines major risks that can occur before, during and after construction and what can be done to mitigate those risks.

Based on data from BuildFax, a source of building permit data, the number of residential renovations has been rising, and is now at a similar level to 2006, which was the “height of the real estate market,” ACE suggests.

Remodels categorized as “substantial” increased 9.3% in 2012 and 10.2% in 2013 and this year “appears to be on a similar trajectory,” ACE also noted.

“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,” Bob Courtemanche, division chairman of ACE Private Risk Services noted in a statement on the report.

“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.”

Among the other best practices recommended in the report, ACE suggests thoroughly vetting any contractors before construction, including researching them through relevant licensing agencies and finding past job history.

“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,” ACE also notes.

The company also emphasizes that homeowners ensure worksite safety during construction, as well as keeping valuables stored away safely.

Following completion of renovations, ACE also notes that homeowners should have their insurance professional re-evaluate their coverage needs.