Find out How Home Renovations Affect your Insurance

 In Home Care Tips


Homeowners renovate for a variety of reasons. Some build additions to accommodate their growing families. Some replace outdated systems, making their house more energy-efficient and eco-friendly. Still others want to increase the aesthetic appeal and market value of their homes.


Whatever the reason you decide to undertake a renovation project, it’s important for you to know that you are contractually obligated to report additions and other significant renovations to your insurance carrier. That’s because renovations typically increase the value of your home; if you don’t update your policy, you may fall short on coverage.


The Insurance Bureau of Canada recommends that you insure your home based on its replacement cost, the amount it would cost to rebuild the house if it were destroyed. (This dollar figure differs from the market value and the tax assessment value of your house.) If you raise the value of your home by renovating, the replacement cost will rise as well.


“If you remodel but don’t report that activity to your insurance carrier, then you might not have enough coverage to pay any claims that arise,” explains Jeff Burke, president and CEO of Western Financial Group. “For example, if you remodel your kitchen but then a fire destroys much of it, your insurance isn’t likely to pay all of the costs of restoring the kitchen unless you have updated your policy to reflect the new granite countertops, high-tech appliances, flooring, and the rest.”


It’s important to get your insurance company involved as your renovation project is taking place so that you are covered in the event of accidents that may occur during the project, harming you or workers who may be involved. Also talk with your insurance representative about these three items: whether you are required to remain in your home while the work is being done, since some policies will not cover claims for accidents that happen while the house is vacated; whether your renovation is extensive enough to change the classification of your building while work is being done (to that of a “building under construction”); and what impact unknown challenges (such as uncovering hazardous materials) could have on your insurance coverage.

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