How home renos affect your house insurance

Posted by on Friday, March 25th, 2016 at 12:03pm.

Insurance policies make for pretty dry reading and not many have read their insurance contract line by line.  So it’s easy to get caught should you violate your policy or find out you’re not covered for certain things.

You might however like to education yourself about particular clauses that might eliminate your protection while renovating your home.  Things like a broken water pipe while doing your upstairs bathroom that drenches everything below it, or if you live in a condo, you downstairs neighbour’s unit.  No one wants to go through the whole rigmarole of submitting a complicated claim only to have it denied by your insurer.

You might like to call your insurance company and tell them you’re planning a renovation but this is not a 100% guarantee that you’ll be protected if you file a claim.  They might not know and they would also have to consult with actuaries about whatever it is you intend on doing.  They calculate risks and not feasibility about what you’re doing particularly if you’re altering the structure of your home.   They in turn would have to consult with other experts and if they do indeed discover that your renovation is so grand that you’re altering the structure and integrity of your home you might have to get more specialized insurance elsewhere. If you’ve taken off the roof and exposed walls, this renovation might be considered a home under construction.  If it rains or snows and it ruins your home, your insurance company is not going to want to honour your policy.

For example, say you have a beautiful heritage home in inner-city Calgary and you’ve done your due diligence, hiring an architect to come up with drawings, getting all required permits and hiring a general contractor to oversee the job.  Say, for instance, you were planning on making this old single-family home into two separate and legal units.  And, you knew that this home would be worth more when you were finished and you were aware that you probably have to pay higher premiums for insurance.  You might also discover that regular old home insurance wouldn’t cover you and a policy that would protect you was more specialized, costing you quadruple what you were paying before.  Not just more, but four times your current rate for the duration of your renovation.  Since insurance rates are calculated annually, you’d be covered during your renovation but you’d have to pay these higher premiums for the entire year following. It’s often referred to as builder’s risk.  Luckily it can often be removed after the renovation is done and an inspection report completed.  You can then bring your insurance premiums down to a more manageable amount.

Moving out during your reno?

Living in your home while trying to replace your kitchen and bathrooms can be very difficult.  Often it’s easier to rent a nearby condo but if your home is vacant for longer than 30 days, that may be an issue with your insurance company.  Check out a vacancy permit which will cost extra but will keep you from violating your policy.

Plus, your home might not be as secure while you’re out?  You could possibly be covered for theft but it again depends on how big this renovation project is.  Does your general contractor have insurance?  Good question to ask.  What if one of their employees is hurt on the job – that job being on your property.  Who’s on the hook for that?

Have you recently renovated?

If you’ve already done some home improvements without notifying your insurance company, there’s no time like the present.  You have likely added to the value of your home in a significant way and now the replacement value of your home is much, much higher.  Let your insurance company know and provide receipts.  Let’s say you have a devastating fire tomorrow.  How will your insurance company know that you just invested $60,000 in your home?

It pays to bit the bullet and pay the higher premium.

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