Woody Allen once said: “There are worse things in life than death. Have you ever spent an evening with an insurance salesman?”
But if you are planning a renovation to your home and don’t take the time to speak to your insurance broker, you could be making a big mistake. During and after a renovation, your current policy may not cover your home and contents if something bad happens.
“Before you pick up a hammer or drill, it’s important to understand and learn more about the insurance implications of upgrading your home,” says Dave Minor, vice-president at TD Insurance. “While being handy around the home is convenient for upgrades such as painting or installing crown moulding, more challenging projects like tackling the electrical work yourself could actually invalidate your insurance policy. Speaking with your insurance provider can be a quick way to help clarify the unknown.”
The Canadian Home Builders’ Association (CHBA) – Alberta chapter says that generally, a homeowner’s policy allows for minor repairs and renovations without jeopardizing coverage. However, if you are doing the renovation work yourself, or acting as your own general contractor, you may need to arrange for additional coverage because some policies have a standard exclusion related to professional liability. You may not be covered if someone is injured on your property.
If you are hiring a contractor, ask them for proof of liability insurance. Check out the limit and extension of the coverage and the date the policy expires, advises CHBA. Then ask your insurance broker to make sure that between the contractor’s insurance and your policy, you are well covered.
“Upgrades requiring extensive work, such as adding an extension to your home, may require you to change your entire policy to a building under construction,” says Minor. “If you are not living in your home during renovations, it becomes an easier target for thieves and undetected water damage, which is why your insurer may require you to secure a vacancy permit if you move out for more than a month.”
CHBA says you should find out whose insurance – yours or your contractor’s – covers the theft of building materials from your property.
If you must remove your belongings and put them in storage, make sure they are still covered by your policy.
During the renovation, there may be complications that delay the work and could impact insurance coverage. If something unexpected is uncovered – such as a hazardous material that must be removed – that should also be reported to your broker.
The Insurance Bureau of Canada says that all homeowners should insure their houses according to what it would cost to rebuild the house and replace its contents in the event it is destroyed. “This amount is called the replacement cost, and is different from the market value of your home and even from your tax assessment value,” says the IBC. An accurate assessment of your home’s replacement cost is essential to making sure you have enough coverage.
The IBC has a home assessment checklist on its website to help you determine the replacement cost.
Ah, you say, but why would I want to tell my insurance broker that my house is more valuable after renovations? Won’t it just cost more money to insure it?
It may, but there are also renovations that can reduce your premiums. “Simple renovations like installing security devices, such as alarm systems and deadbolts, or fixing your weathered roof may decrease your premiums,” says Minor. Upgrading your electrical system or plumbing could also result in some savings.
However, chances are that you have increased the value of your home, so you need to be prepared in case something happens to it. Another consideration is if you have changed the way you use the home, such as adding a basement apartment or a separate addition to rent out. If your policy doesn’t reflect these changes, you may not be covered at all.
“Make sure you also understand what is not covered,” says CHBA. “Insurance is not a warranty for the work being done on your home, and it does not protect against shoddy workmanship. However, a written contract and the renovator’s commitment to customer satisfaction will.”
Written by Jim Adair