The Loans Canada team sits down with Gary Schwartz of the Canadian Lenders Association to talk about open banking.
Do You Need Extra Insurance When Renovating Your Home?
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Every homeowner needs property insurance. In the event that your home is ever burglarized, vandalized, or damaged by a natural disaster or nefarious actions by others, any damages you suffer can be compensated with a property insurance policy. And if you have a mortgage on your home, odds are your lender will require a property insurance policy in place before they agree to extend a home loan.
But in addition to covering things like damage from a fire or stolen goods, will your insurance policy cover you while you’re renovating your home? Better yet, do you need to take out extra insurance to make sure everything is covered?
Anything can happen when you’re doing extensive work on your home. Workers can get hurt on the job, damage can be done to your home during construction, and theft is more likely because your home is probably less secure than normal. The question is, do you need extra insurance when you renovate your house?
Does Regular Home Insurance Cover Home Renovations?
It’s important to find out whether or not your average home insurance policy covers renovations. Some insurance companies include renovation work, while others explicitly exclude it. Others still may even offer increased coverage for a higher premium.
Home Insurance & Builder’s Insurance
There are typically two types of property insurance policies that would be required to provide the appropriate coverage when you are renovating your home: insurance to cover your home and belongings, and builder’s insurance. The latter form of insurance covers homes that are under construction and protects against damage.
It should be noted, however, that many regular home insurance policies may not provide coverage if the project is valued over a certain amount, often around $50,000. If your project is extensive and requires structural changes, you may need to revamp your policy from a standard policy to one that deems your home officially under construction.
If you are away from your home for more than 30 days while the project is taking place, your insurance company should be informed, as this could put you in violation of your policy. In this case, you may require a vacancy permit, which can cost you a little more in monthly premiums.
What Is Covered?
Be sure to revisit your current policy to see exactly what would and wouldn’t be covered while your home is under construction.
For instance, would your home be covered for damage done from leakage through the roof while it was being repaired? Will a gas leak be covered if a line is ever accidentally hit? Or would theft be covered if your home was left unsecured while replacing windows and doors?
These are just some examples of things that can happen while your home is being renovated. That’s why it’s so important to verify what is covered and what isn’t under your regular policy.
How Can Renovations Change Your Home Insurance?
Your insurance policy could be impacted if your home’s value or structure changes as a result of your renovation. If that happens, you may need to revise your home insurance policy to make sure that it reflects your home’s new value.
The size and cost of your renovation will play a key role here. For small projects, your current policy may still provide adequate coverage. For instance, if you’re installing a new bathtub or vanity, you’re not really making a massive change to your bathroom or home. In this case, your home insurance policy may cover you.
Basically, if your home is still secure (ie. there is no added risk for theft or damage to the home), there shouldn’t be a problem, as long as the work is not major. But to be certain, take the time to review your contract before you take a hammer to nail.
For larger projects, on the other hand, your home insurance policy may have to be modified or added to for jobs that are much more significant and expensive, especially if the structure of the home is being drastically altered and if the project costs over $50,000 to complete.
Here are some ways that your current home insurance policy may be affected based on work being done:
Vacancy For More Than A Certain Time Period
If you are planning to be out of your home while it is being renovated, your policy may become void if it is vacant for more than a specified period of time.
Your Home Is Being Significantly Modified
If your renovation project is going to substantially change the structure of your home, you’ll need to notify your insurer, otherwise, your policy may be void. And if anything happens that causes damage to your home, you may find yourself unable to file a claim.
You may need builder’s insurance if you are planning to do the renovations on your own. Otherwise, if you are having a contractor take care of the work, make sure they have their own insurance policy before starting the job.
Before you make plans to renovate your home, be sure to give your insurance company a heads up. That way they can inform you whether or not you will be lacking any coverage as a result of the work you plan to undertake.
There are so many things to consider when it comes to renovating your home, from the plans, to the permits, to hiring contractors and beyond. But one thing you may not have thought about is your home insurance policy. Review your current policy to verify if all construction will be covered. If not, you may want to revamp your policy or consider a new one to ensure complete coverage during renovations.
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