🔨 The $150,000 Renovation That Cost $1.2 Million
You finally saved enough to add a modern extension to your home in Melbourne. The builders arrive, the scaffolding goes up, and the roof comes off.
That night, a massive storm hits. Rain pours into your exposed house, destroying the timber frame, the expensive hardwood floors, and the plasterboard. The damage is catastrophic.
You call your home insurance provider (NRMA, AAMI, Allianz, etc.). They ask one question: "Did you notify us that you started construction?" When you say yes, they reply: "We are sorry. Your policy automatically suspends coverage for liability and damage during construction work valued over $50,000. Your home is effectively uninsured." This nightmare happens to Australians every day.
Standard Home & Contents Insurance is designed for a "sealed, secure, and lived-in" residence. It is NOT designed for a chaotic construction site.
Most Product Disclosure Statements (PDS) contain a strict clause: If you commence renovations valued over a certain threshold (typically $25,000 to $50,000 depending on the insurer), your Legal Liability and Building Coverage are suspended until the work is officially completed.
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| Planning a Renovation? |
What is 'Contract Works' Insurance?
To fill this dangerous gap, you need a specialist policy known as Contract Works Insurance (or Construction All Risks).
✅ What It Covers
- The Existing Structure: Your original house (while it's vulnerable). *Note: Not all policies cover this automatically; check carefully.
- The New Works: The new extension, materials stored on site (timber, bricks), and fittings.
- Public Liability: If a delivery driver trips over a cable on your site and sues you for $10 million.
- Theft & Vandalism: Copper pipes, tools, and appliances are magnets for thieves on unsecured sites.
Who Should Buy It? (The "Gap" Trap)
This is where homeowners get confused. "My builder has insurance, right?"
Scenario A: You Hire a Licensed Builder
The builder must have their own Contract Works policy.
👉 The Trap: The builder's policy usually covers their work (the new extension). It often DOES NOT cover your existing house. If the builder accidentally burns down your original house, their insurance might not pay out, and your home insurer will deny the claim because it was a construction site. You need to ensure the existing structure is covered.
Scenario B: Owner-Builder
If you are managing the project yourself (hiring individual tradies), YOU are the builder in the eyes of the law.
👉 You carry 100% of the risk. You MUST purchase Owner-Builder Contract Works Insurance. Without it, if disaster strikes, you lose the asset but still owe the mortgage.
The "Unoccupied" Clause
Are you moving out during the renovation?
Most home insurance policies automatically lapse if the home is unoccupied for more than 60 days.
If your renovation drags on for 6 months (as they often do in 2026), and you are living elsewhere, your standard policy is VOID. Specialist Contract Works insurance solves this by covering the property explicitly while it is empty and under construction.
🛡️ Chief Editor’s Verdict
Renovating is stressful enough without risking bankruptcy over a paperwork error.
- Call Before You Hammer: Notify your current insurer before a single brick is touched. Ask specifically: "Will my policy cover me during a $150k renovation?" If they say no (which is likely), switch to a specialist insurer immediately.
- Check the Builder’s Paperwork: Do not just take their word for it. Demand to see the "Certificate of Currency." Verify it covers YOUR address and check if it includes "Existing Structure" cover. If not, you need to take out a separate policy to cover the gap.
Build your dream home, but insure the dirt it stands on.
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