Your home is one of your most valuable assets, and investing in it is always a good choice. Home renovations and improvements require lots of planning, including obtaining a permit, creating a budget, and analyzing different options, materials, or contractors. Most homeowners consider all of these aspects when planning their costly home improvements. However, they’re not aware of the impact their project has on their insurance policy. A survey conducted by Environics Research for TD Insurance indicate that most Canadian homeowners don’t make sure their insurance covers their latest renovations.
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The survey found that only 6 per cent of 2,748 respondents checked whether their home insurance policy covered the project, and just 16 per cent consulted their insurer regarding an update of their insurance policy. Dave Minor, vice-president of insurance distribution at TD Insurance, points out,
People buy insurance to have a safety net in case they ever need to make a claim. Once you make the claim, you do not want any disappointing surprises. So before you pick up a hammer or hire a contractor, contact your insurance provider.
It’s important to remember that your original insurance policy won’t cover the home renovation project. Fifty-six per cent of polled homeowners thought their home insurance policy covered all the improvements, and 24 per cent didn’t realize you had to update your insurance policy if you moved out for more than 30 days during renovations. Minor suggests,
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.
Renovating your home is often a major investment, and experts recommend you ask your insurer about the insurance implications of your project before you start work. Almost one-quarter of respondents didn’t know electrical upgrades could decrease their premiums, and more than half didn’t realize installing granite countertops could increase their premiums. Discussing your plans with your insurance provider could save you lots of money and nerves, since the probability of an insurance claim increases during the renovation process.
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Plus, a homeowner could be liable for possible injuries to the contractor working on their property. Most people believe this is always covered by the contractor’s insurance, but this isn’t true. In fact, 41 per cent of survey participants weren’t aware that they could be liable for their contractor’s medical bills, lost wages, or damages for pain and suffering. Always remember to check your contractor’s public liability insurance certificate. Minor notes,
The amount of insurance coverage they have would depend on the type of renovation, the number of employees and cost of the renovation. The higher the limits of coverage, the more protection you would have.
According to the survey, homeowners don’t tend to know that renovations affect their insurance coverage. Most don’t review their insurance policies or discuss the matter with their insurance providers. Only 6 per cent of respondents from British Columbia checked their insurance policy before carrying out home improvements, and only 17 per cent consulted their insurers. Even though another report from TD Insurance found that people from British Columbia were more likely to review their insurance than people from other provinces, half wouldn’t ask their insurers to explain the details they couldn’t understand. The report further showed that 32 per cent of respondents wouldn’t ask for any clarification because they think it’s too complicated, 32 per cent because they don’t have enough time, 22 per cent because they’re embarrassed of their lack of knowledge, and 21 per cent because they simply don’t care.
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But understanding your insurance policy and being able to discuss any problems with your insurance provider is extremely important if you want to be sure your home insurance policy covers your renovation project. Contacting your insurance provider and disclosing the improvements is one of the most important tasks you should see to before you start work. Pete Karageorgos, manager of consumer and industry relations at the Insurance Bureau of Canada, says it’s best to think ahead and be forthcoming. He adds,
People are not aware that in many cases, doing renovations to their home would require an update to their policy. If the home is not insured to value, you may not have enough coverage and you will not be completely protected. If you are spending $30,000 to finish your basement, you want to make sure you have insurance to cover it in case something happens. Otherwise, there is literally (sic) $30,000 down the drain.
Moreover, 60 per cent of Canadian homeowners admitted they have made at least one mistake when they purchased a home, according to the Home Ownership Poll conducted by the Royal Bank of Canada. The most common mistakes include buying a property that requires major renovations, not having a bigger down payment, and omitting a home inspection.
Renovations should increase the value of your house as well as the quality of your life, and it’s important to keep in mind that the upgrades will impact your insurance policy and to inform your insurance provider in order to find out how they affect your coverage. For major renovations, you should usually increase your insurance before the work’s done. You should always keep your insurance company informed about the extent of your renovations, and if you’re not satisfied with your insurance rate, you can always consider changing your insurance provider. Keep in mind that it’s always easier to deal with any problems when you’re prepared.
