You’re planning a major home renovation, and you’ve got your list of what needs to be done: create a renovation plan, interview contractors and their references, and make a payment schedule. However, one item you should add to your list is to tell your home insurance provider that you plan on renovating. When you do renovations, you change your home from how it used to look when you purchased your policy. That means its value might change as well. Let’s look at what exactly you should tell your insurance company.

Do I need insurance for renovations?
The short answer is yes. A few reasons why you should speak to an insurance broker before starting a renovation are:
 

• Renovations that significantly increase your property’s rebuilding costs could leave you underinsured.
• If you have to leave your home for 30 days or more and shut off your utilities for the renovation, your insurer may assume you’ve left your home vacant. They may not cover any loss or damage that occurred while your home was an easier target for burglars.
• Your existing limits may be insufficient if someone gets injured during the renovation.
• If you file a claim during a renovation and failed to notify your insurer before starting, your claim may not be accepted.

Your insurance broker can also advise you on whether or not you need additional coverage for a specific renovation project. For example, adding a deck, a fireplace, or a pool will likely increase your monthly costs.

How renovations can impact your home insurance policy
Some homeowners don’t contact their insurer because they worry about increased costs. Not only will your home be sufficiently covered, but your costs may decrease depending on what you do. If they do increase, it’s likely due to the increased replacement cost, which is the amount it would cost to rebuild your home from scratch at current prices.

Renovations that can decrease costs:

• A fire monitoring system. Carbon monoxide and smoke detectors are relatively inexpensive investments that will help in the event of an accident.
• A new furnace or air conditioner can make your home more energy efficient.
• A roof replacement can decrease costs by 10% or more.
• A security system. Anything that makes your home more secure, such as installing alarms, cameras, deadbolts, or motion sensor lights, can decrease your rates.
• Updated plumbing and electrical. Outdated plumbing and knob and tube wiring are considered significant risks. Updating them reduces risks associated with outdated systems and can decrease your insurance rates.

Renovations that can increase costs:

• A home-based business. Converting a bedroom, basement, or garage into a workspace will require that you have home-based business insurance.
• A pool is a liability and typically will increase your rates.
• An addition. Adding square footage to your home will increase your rates because you’ll need to increase your replacement cost.
• Bathroom and kitchen upgrades can increase the value of your home by up to 50%.
• Unique design features and custom work will require additional coverage.

An increase in costs isn’t necessarily bad; it’s adjusting your limits to ensure your home’s new value is correctly reflected so you’re adequately protected.

A renovation is exciting and stressful. Knowing that you’re covered in case anything unexpected happens can help to reduce your stress. If you're a current OTIP policyholder, contact us at 1-833-494-0089 to review your existing home insurance policy and discuss enhancing your protection with additional optional coverage. If you’re not insured with OTIP and are shopping for home insurance, call us at 1-833-615-9326 to get a quote and receive a $20 gift card of your choice!