There’s a lot to consider when you decide to renovate. Aside from choosing the right tile for your new backsplash or the perfect shade of paint, you have to think about insurance. Though home insurance isn’t mandatory in Canada, most mortgage lenders require it before financing, and it can help protect your property and home contents against damages.
Canada’s home renovation sector is now an $80-billion market with a recent survey indicating that 27% of Canadian homeowners have renovated during the pandemic, and another 20% plan on tackling renovations in the near future.
While some renovations can be costly, they can help increase the value of a home. Regardless of the size of your renovation, it’s always important to consider how any improvement will affect your home insurance so you can ensure you don’t run into any implications or added costs.
What types of renovations affect your home insurance?
Before you make any home improvements, there are a few things you’ll need to consider. Namely, planning your reno, deciding on a budget, and making sure you’re insured, because some upgrades will have varying effects.
We spoke to Matthew Johnson, customer care manager with Sonnet Insurance, who said any changes that would impact the cost or the likelihood of a claim would typically impact your insurance rates.
This includes renovations such as:
- Changes to square footage;
- updates to your roofing;
- changes or updates to the plumbing or wiring;
- the addition of a fireplace;
- building a new deck or outdoor feature like a pool; or
- adding a home office or workshop for your own business, which could result in needing additional liability insurance.
Depending on the company, anything that changes the replacement cost of your home could impact your policy, so it’s important to check with your provider before starting any major renovations. It’s also important to look into home insurance upgrades when adding a rental space. As a landlord, you’ll have additional responsibilities on top of typical homeowner duties.
What types of renovations don’t affect your home insurance?
On the other hand, most cosmetic changes won’t result in an impact to your insurance rates or coverage. According to Sonnet, updating your kitchen counters or cupboards, changing your flooring, renovating the walls to expand a room, or updating your bathroom are some examples that might not impact your insurance rates or eligibility.
Johnson said, “it’s important to note you should still inform your insurance company of these renovations even if you think they may not impact your insurance rates/coverage.”
We also spoke to Justin Thouin, co-founder of LowestRates.ca, who said while some aesthetic upgrades may increase replacement costs throughout your home, other maintenance upgrades are unlikely to have an impact. Thouin says this includes new paint or other touch ups, like on grout.
When do you need to inform your insurance broker about renovations/potential renovations to your home?
You should inform your policy provider of any renovations being conducted (or potentially conducted) in your home before the work actually begins. This will help avoid any problems or increases to your insurance rate, and guarantee coverage still exists during construction. Depending on the type of renovation, you may also need to consider adding additional insurance for the duration of the work.
“If you’re doing a major project and you are going to have contractors and builders working on your property, you may be advised to add temporary liability insurance in the event of a worker injury,” said Thouin.
While the company you hire will have some form of insurance in place, it might not fully cover your responsibilities.
Informing your provider prior to construction beings also helps protect you if anything is damaged during renovations, like if there was a flood, for example. Your provider will be aware, and your new finishes will be covered. What’s more, Thouin says if you’re going to be away from your property for 30 days or more, including because of renovations, you also need to notify your insurer as an extended absence could void your insurance policy.
Be sure to read the fine print of your policy so you can fully understand your coverage. Of course, if you’re unsure, it’s best to reach out to your provider to discuss your options.
It’s also a good idea to speak with your REALTOR® before starting any major renovations to learn what’s currently trending in your neighbourhood, potentially earning you a better return on investment.