Home Renovations And Insurance

Oct 14, 2021

Home Renovation Insurance Tips

Insurance often gets overlooked when renovating despite planning, figuring out timelines, budgeting, and choosing décor.

It's a common mistake – but it's a considerable risk that could void your home insurance if something goes wrong. In Ontario, only 6% of homeowners looked into their policy prior to renovating. Only 14% asked if they needed to update it after the renovation was complete.

In this blog post, we will guide you through the reasons why you need specific policies during renos and how to make sure you have proper protection.

Do I Need Insurance For Renovations?

Yes, you should contact your insurer before starting a renovation. Two reasons why it's crucial to speak to them prior to starting are :

Existing limits may not be sufficient if someone gets hurt during the renovation.
Renovations that increase the property's rebuilding costs could leave you underinsured.

Your provider can also clarify whether you require additional coverage for a specific renovation project. For instance, adding a pool or fireplace will likely increase monthly costs. Another factor to consider is if you file a claim during a renovation and have failed to notify your insurer, it may not be accepted.

How Renovations Affect Insurance

Some projects will cause your premiums to rise; however, others can lower your costs and make your home safer.

Some homeowners don't contact their insurer after a renovation because they are worried about their increasing costs. Depending on what work you get done, your costs may lower. If they do increase, it's likely because of the increased replacement value.

For example, let's say your house is worth $400,000. You then decide to do an extensive bathroom renovation that increases the room's size and uses higher quality materials. Your house may not be worth $440,000, which has increased the rebuilding cost if there is an accident.

Suppose you are moving out for more than 30 days during a reno. During this time, your house is an easier target for a burglary. It is recommended to look into getting unoccupied dwelling insurance.

Renovations That Can Lower Costs

New roof : A roof replacement can lower costs by 10% or more.
Updated plumbing and wiring : Older plumbing and wiring are considered huge risks. Updating them and ensuring they are up to current building code will lower your rates. Installing a sewer backup valve can also be beneficial to your costs.
Installing a new furnace/air conditioner : This will help make your home more energy-efficient.
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.
Fire monitoring system : Smoke and CO2 dioxide alarms are inexpensive investments, even if there is no discount from installing them, they will help in the event of an accident.

Renovations That Can Increase Costs

Pool : Pools are a liability and generally will increase your monthly costs.
Home-based business : Converting a bedroom, basement or garage to a home office or workspace will require you to have home-based business 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% increased value.
Unique design features : Custom work and unique building features require additional protection.

A rise in costs after a renovation is not a bad thing. The increase is just adjusting limits to ensure your home's new value is correctly reflected, so you are protected.

Does Insurance Cover Renovations?

It's important to know that your policy does not necessarily cover the costs of a renovation – any significant improvements may leave you underinsured.

DIY Renovations

Even if you are doing the work yourself, you still need to contact your insurer before starting the renovation. Doing so will ensure you remain covered and update accordingly.

Extensive Renovations

For extensive renovations, you may be required to change your policy to a building under construction and builder's risk insurance. Being diligent with your home renovation plans includes confirming you have adequate coverage, in addition to checking contractor insurance. You'll want to make sure they have adequate liability and worker's compensation protection.

Factors To Consider With Home Renovations

Insurance during renovations ensures you are protected. But what about when the renovation is complete? This is another time when you should contact your insurer to update your plan. Renovations can change a lot about your home – square footage, features, and of most concern to insurers, replacement value.

Having your insurer re-evaluate your home post-renovation ensures your replacement value is accurate and up to date.

Renovations can increase your home value : Your home value is directly tied to the replacement value in your home. If renovation changes your home's value, your replacement value will need to be adjusted.
You never know what you could find : Renovations can be unpredictable, especially if you are renovating an older home. You may find dated wiring, old plumbing and other issues that need to be updated to maintain your coverage.
Liability : There is always a chance a worker could be injured while performing work on your home. Depending on the situation, you may be liable.
Vacating your home could nullify your policy : Home policies typically require you to occupy the home while the agreement is active. Suppose you are required to vacate your home during the renovation for an extended time. In that case, you could be breaking this policy rule. You can avoid this by requesting a vacancy permit from your insurer.
Someone could burglarize your home : Between all the people coming in and out of your home, potential entry points due to the renovation and more people with access, burglary is a possibility.

Suppose any one of these situations occurs, and you failed to notify your insurer about the renovation. You could be on the hook for the costs, have your claim denied, or have it voided.

Myths About Insurance During Renovations

There is misinformation out there about what you should do before a renovation. Here are the most common myths about insurance related to renovations :

Renovations don't impact how much you pay : Home renovations can increase your rates, but they could also decrease your rates. They could also void your coverage or impact claims if your insurer is not updated about changes to your dwelling.
My home is covered during renovations : Many assume it is covered in all situations, including renovations. This is not true. Review your agreement to see how a renovation impacts you.
If a worker is injured during the renovation, their company will cover it : You could be liable for injuries caused to contractors on your property. The more coverage the worker has, the more protection you will have if they are hurt.

Should Building Contractors Have Insurance?

When hiring contractors, it's essential to require proof of full liability in addition to making sure they are bonded and registered with WSIB. You have the right to request all this information when considering contractors.

Home Renovation FAQs

What Happens If I Just Completed A Renovation And Failed To Notify My Insurer?

You may be worried that your Ontario home insurance will be cancelled after a renovation has been completed. If you are in this situation, call your provider right away to ensure you have adequate protection.

Does Insurance Pay For Home Upgrades?

Insurance will protect you from any damages or liabilities during renovations. Still, it would be best to tell them what is being done and what the value is. If you don't update it and need to file a claim, it could be denied or not be fully covered. Most policies state that a renovation project will invalidate your coverage if you fail to notify your provider of any updates or changes to your home.

Can Upgrades In My Home Lower Insurance?

Depending on what types of upgrades you add to your home, it can lower your yearly costs. Savings are typically seen in projects that add safety to your home, such as new wiring in a heritage home or security systems.

What You Need To Know About Home Renovations And Insurance