The following is an extract from The Owner Builder magazine. To view the full article go to: www.allrisk.com.au/Information/InsureMe_p1.html
Houses built with rammed earth, straw bale, mud brick and other alternative materials, occasionally even such a wonderful idea as used car tyres, are becoming ever more popular. Nowadays not only do the majority of people know about these construction methods, but they could probably even tell you a few of the benefits; energy efficiency, cost advantage, noise reduction, durability, aesthetic appeal, lower environmental impact, etc.
And yet, for all of this, it is still difficult to get insurance for these projects. Why?
It really comes down to how well the insurer understands what you are actually going to be doing, and what risks are involved. In order for insurers to offer you cover they need to have an intimate understanding of the situation and the associated risks. If they don't, they generally will not offer you insurance. In some cases, if they understand the risks only moderately well they may offer you insurance but not at competitive prices and often with some major exclusions to limit the cover afforded by the policy. The ideal situation is where they understand the activities and the related risks extremely well. In this case the insurer will offer you reasonable cover at reasonable prices. That's the theory, but how is it put into practice?
In recent years as the popularity of alternative building materials has increased dramatically, the demand has also significantly increased for insuring these projects. Insurers do tend to eventually respond to these levels of demand, and then react by seeking the degree of knowledge and understanding that will allow them to offer competitive products to meet the demands. The key word there however was "eventually".
So what's the solution?
- Educating the insurers. When they perceive that the demand is high enough they do seek to educate themselves on the risks, but prior to that we can present them with information to help them get there sooner.
- Understand the reason there is a problem in the first place. The key is not to give up too quickly. If you are not asking for the insurance then the perception is that there is not much demand, and therefore the problem never gets resolved.
There are other organisations whose activities are also helping greatly to educate the insurers. All around Australia, companies are springing up who exclusively provide guidance, training and even direct assistance in using alternative building materials. With this kind of help, the risks associate with an alternative build can be reduced significantly.
There are benefits that come out of this in relation to insurance. For starters, if the owner builder is trained in the best methods to do the job, they are taking fewer risks. When insurers become aware that there is method and discipline involved in these projects their perception subsequently improves. The other long-term benefit is that a well-guided or well-trained owner builder ultimately has fewer insurance claims, and over time that brings prices of insurance down.
It's important to point out that while there are specific alternative building method trainers, there are also the general owner builder courses to consider. In some states like NSW, QLD, and ACT it is compulsory to do an owner builder course before becoming an owner builder. In the other states these course are however also available, with options both online and in person, so please do consider doing a short course, even if not absolutely required. You should check with your "alternative building materials" expert whether they also provide the general owner builder training or only the specific skills for the particular materials. Many will have a range of options available depending on how much experience or knowledge you already have.
(note: The required owner builder courses cover regulatory information, as well as some basic project management, budgeting and scheduling information.)
So how's the availability situation now?
Sadly, availability for construction insurance is still very limited. Greater progress has been made in the general house and contents insurance domain, with availability of cover being quite good now for houses built of alternative materials. However, this is not the case for owner builder construction insurance.
There are two major reasons why this may be the case. The first is that insurers, while having a good understanding of the static risks associated with the already constructed buildings, still do not fully understand the risks involved in the actual process of building them.
The second, and more likely, reason is that of potential variability. An example of this would be the availability of tradespersons in your local area who are qualified or experienced in handling these building materials, and the proper techniques for the application of them. The lower the availability of expert assistance, or even advice, the greater the inherent risk. As discussed above, this situation has improved in leaps and bounds in recent years. We are just waiting for the insurers' perception to catch up with the reality.
Whatever the reason, unfortunately most owner builder insurance schemes do still discriminate in one way or another against alternative construction types. But there are insurers out there willing to offer you good cover at a good price; it's just a matter of calling the right supplier.
Mark Adams (the author) has several years experience in the owner builder insurance market. He is an insurance adviser with AllRisk Pty Ltd, an authorised representative of Westcourt General Insurance Brokers (AR 12345), and is also a specialist provider of owner builder insurance Australia-wide. 1300 255 747, www.buildmate.com.au