Renovations are exciting! There are so many things to think about, such as designs and upgrade options. And sometimes, the hustle and bustle means you may forget to notify your home insurance provider of these upgrades. Changes to your home means that you’re changing what is insurable on your policy. According to canadianunderwriter.ca, only 6% of Ontarians looked into their policy before renovations began and only 14% followed up with their provider afterwards. If it’s a major project, such as finishing a basement, or even a minor upgrade, like replacing kitchen cabinets, renovations may affect the value of your home. As a result, it’s important to have the right insurance protection. If you don’t inform your provider, they can deny an insurance claim when you need it most. Let’s examine the relationship between home renovations and insurance, and why it’s important to keep your isure broker in the know.
Contact your isure broker before you begin
A large percentage of homeowners overlook insurance coverage during the planning stages of a renovation. If your project is big, small, DIY or contracted, you should discuss your plans with your isure broker or insurer. It’s important to maintain adequate insurance coverage that reflects your home’s changing worth. Neglecting this one simple step can be costly down the line if you run into any troubles during the renovation.
Do you need insurance for home renovations?
Yes, you do. It’s important to contact your isure broker or insurer prior to starting your renovation. There are two main reasons why you should speak with your insurer prior to starting your renovation project:
1. If someone is hurt during the renovation, your policy’s existing limits may have insufficient coverage
If you decide to handle the renovation on your own, it’s important to understand that you assume all the risks. In doing so, you will be assuming more risks and exposures than intended by your homeowner’s policy. Renovations increase the likelihood of someone getting hurt, and most standard homeowner’s insurance policies aren’t cut out to handle that level of liability. If a friend or relative helps out as a favour and gets injured, your homeowner’s insurance typically covers the cost of their injuries, up to your policy limits. For an extra layer of protection, it’s a good idea to also carry umbrella liability coverage, which kicks in to provide coverage above your homeowner’s limits. It’s wise to speak with your broker about whether you have enough coverage prior to any work being done.
Respondents of a survey by BNN Bloomberg and RATESDOTCA show that approximately 59% of Canadians are choosing to fund renovations themselves, and only 35% contacted their insurance providers.
2. Renovations will likely increase your home’s rebuilding cost or replacement value, possibly leaving your home underinsured
Your home insurance policy covers your home and its contents in the event of an insured loss. Anything that affects your home’s replacement value–what it will cost to rebuild it with materials of the same quality in the event that it’s destroyed – affects your premium and coverage. You have a contractual obligation to report any changes made to your property to your insurer. Failing to do so may affect your coverage in the event of a loss. Talking to your insurer directly or isure broker about your renovation plans prior to starting is necessary in order to find out how and when to update your coverage.
Experts estimate that 1 in 4 remodelling projects add at least 25% to the value of a home. However, most homeowners often forget to increase their coverage to protect their investment.
Hire a professional contractor
Being diligent with your home renovation plans includes confirming you have adequate coverage. If you are thinking about hiring a contractor, this is even more essential. Homeowners generally don’t have coverage against incomplete or defective work if their contractor isn’t insured. The best way to minimize your renovation risk is to hire a reputable general contractor for the job. According to Finder.com, you should ask the general contractor to provide a Certificate of Insurance and/or copies of the policies as part of the vetting process. Be sure to check for the following:
- General Liability: Ask if the contractor has liability insurance, which covers losses due to negligence and errors or omissions. They can, in some cases, result in property damage. Also, ask that you are added as an “additional insured.”
- Builder’s Risk: For extensive renovations, you may have a requirement to change your policy to a building under construction and Builder’s Risk insurance. This policy covers damage to your home and materials, including those not installed yet.
If you’re hiring an outside contractor, check that they’re licensed and insured for both liability and worker’s compensation. It’s a good idea to check the credentials of any subcontractors, too—we don’t recommend leaving something this important to chance or assumptions.
If you are undertaking any part of the renovation project yourself or coordinating as a project manager, then you may need Builder’s Insurance. It’s best to check with your insurer or isure broker to see what they say!
How home renovations can affect your insurance
Although adding to your home may seem like it can only increase your insurance premiums, your renovation can also lead to savings, as well. Depending on the type of work done, your premiums may increase or decrease. Here’s how:
Home renovations that can increase your premiums:
- Pool, deck or trampoline: Generally, these are liabilities that may increase your monthly costs.
- Home-based business: This also requires a different type of coverage like home-based business coverage or landlord insurance.
- Additions: Adding square footage will increase your rates because you will need to bump up the replacement value that is included.
- Kitchen and bathroom upgrades: According to the 2021 Cost vs Value Report by Remodelling Magazine, these remodels can provide up to a 50% increase in value.
- Unique design features: Custom work and unique building features require additional protection.
- Basement apartments: The value of your home goes up with this type of addition. As a result, replacement value of your home will definitely increase.
A rise in costs after a renovation is not a bad thing. The increase adjusts limits to ensure the correct reflection of your home’s new value so you are protected.
Home renovations that can lower your premiums:
- New roof: Different materials can lower your premium. If you’re looking to install solar panels, you may need additional coverage. However, roof replacement can lower costs by 10% or more.
- Updating your electrical wiring: Knob and tube wiring in your home is a huge risk. Updating them and ensuring they are up to the current building code will lower your rates.
- Installing a new furnace/air conditioner: This will help make your home more energy-efficient.
- Updating your plumbing: Having additional sewer backup insurance or installing a backwater valve can also lower your monthly costs. This will reduce the risk of basement flooding.
- Fire monitoring system: Smoke and carbon monoxide alarms are inexpensive investments. Even if there is no discount for installing them, they will help in the event of an accident.
- Alarm and video security systems: Anything you do to make your home more secure–installing security cameras, alarm systems, adding deadbolts, or motion sensor lights–can help lower your rates.
Suppose you are moving out for more than 30 days during a reno. During this time, your house is an easier target for burglary. It is recommended to look into getting vacant home insurance.
Other considerations for home renovations and insurance
Your building materials may not be covered
What many people don’t realize is that a standard homeowner’s policy may not cover your building materials. The wood, paint and tools you need weren’t accounted for when you first drafted your policy. If you’re doing a major renovation, talk with your insurer about whether or not you’ll need a renovation or builder’s risk insurance policy.
Vacancy can void your policy
Living through a renovation can be difficult, which is why it’s not uncommon to vacate your home while renovating. However, some policies will become void if your home is unoccupied for longer than a specific amount of time, typically between 30 and 90 days. You may be able to request a vacancy permit from your insurer to avoid this.
No permits? No insurance coverage
As a homeowner, it’s your responsibility to obtain all the required legal permits prior to renovation. This ensures that all work meets the local building codes. However, if you have employed a contractor, you may request that they look after this on your behalf. Your contract should clearly stipulate who will obtain the necessary permits.
Between all the people coming in and out of your home, burglary is always a possibility. Unoccupied homes are more likely to be exposed to risks, such as break-ins. Home insurance coverage for insured losses, such as theft, water damage and vandalism, may be typically limited or excluded during renovations, including do-it-yourself jobs. Speak with your insurance representative about available options so that you can maintain coverage throughout this time.
Most homeowners insurance policies require 100% of the home’s replacement cost, so it’s important to raise your home’s policy limit before your project begins.
What to do after renovations are complete
It’s a good idea to set a meeting with your isure broker to re-evaluate your home insurance policy and make adjustments accordingly. Be sure to take into account new furnishings or appliances in your list of changes. Additionally, keep all renovation paperwork, including building plans, receipts, contracts, warranties and proofs of payment. Remember taking steps to have the right insurance in place before the sawdust flies will help to make the renovation process less stressful. A new renovation is an exciting thing, and it can help increase the value of your home. But before you hire any contractors or start construction, you should talk with one of our isure representative about your plans to make sure you retain your coverage and modify it as needed.