When it comes to home renovation, no one has any problem looking for contractors, finding interior designers, researching materials and going over the plans for exactly what they want to do to their home. However, what often gets overlooked is how a planned renovation could affect a home insurance plan.
A survey conducted by Environics Research TD Insurance in 2013 revealed only six per cent of Canadians checked their home insurance policy to ensure they were covered while upgrading their home, with 56 per cent believing they were still covered by the original policy. But according to Matt Hands, senior business unit manager of insurance at Ratehub.ca, that is often not the case.
“There are actually clauses in the majority of people's insurance policies that will state, when a building's under renovation, especially if it's a major renovation, their policy is void. If you're not contacting an insurer and having a conversation about what is and isn't covered during a renovation, you're putting yourself at big risk,” says Hands.
So if something damages your home during the renovation, you may not be covered, which could cost you thousands of dollars and numerous headaches that will put your renovation plans in serious doubt. However, if you do talk to your insurance company, you'll find yourself in better shape, even if it ups your premium going forward.
“They may insist that you need to have a Builder's Risk policy added, which can be around $75 a month. It can be purchased by either the contractor or the home owner, both people just need to be identified on the policy. It basically indemnifies you from damages that happen during a renovation,” says Hands.
So if you do buck the trend and call your home insurance company ahead of your renovation, what should you ask them to guarantee you're protected moving forward?
“It's an open conversation. I would just go to them and say, 'This is what I'm hoping to accomplish, this is the timing of when I want to do this renovation, how does this impact my current home insurance package?' and I would just have them go over every single thing that relates to that. There are no wrong questions,” says Hands.
There are certain renovations though that may impact the value of your property and therefore, raise your insurance premiums. For example, if you're adding an addition to your home that will increase square-footage, or if you're upgrading your kitchen which could in turn increase the replacement value of your home.
“These are things you want to talk about with your insurer prior to approving your renovation because you want to make sure you can afford your home insurance going forward and that you and your insurer are on the same page,” says Hands.
If you're not on the same page, it might be a good time to shop around for a better deal or reach out to other insurers for a second opinion.
The Benefits of Contacting Your Home Insurer
Contacting your home insurer prior to starting a renovation could certainly increase your monthly premiums. However, your planned renovations could possibly bring your home insurance costs down.
“There are opportunities for renovations that will reduce the risk that your home poses to the insurer. Insurance is about risk management from an insurance perspective, so if they identify the property as a higher level risk, obviously your price is a lot higher. If you're reducing that level of risk, you will see a slight decrease in your price,” says Hands.
For example, replacing a weathered roof can reduce the risk of leaks, installing a sump pump in your basement reduces the risk of flooding and upgrading your wiring reduces the risk of fire -- it just depends on the type of renovation you're doing.
If you're undertaking an extensive renovation that will have you vacating your property for 30 days or more, this will also likely void your home insurance policy.
“If you're going to be away from your property for over 30 days, you'll need to get a vacancy permit from your insurer, which will cost you up to $30 to $50 a month. If you are vacant from your property for over 30 days and you haven't told your insurer, but something happens while you're away, your policy can be cancelled or your claim will not be covered,” says Hands.
For most Canadians, their home insurance is too much of an oversight or too complicated to consider before a renovation, but simply having a conversation with your insurer before you start can benefit you immensely by saving you time and money.