It's one of those necessary evils that we hate to deal with but we NEED it for our home renovations - INSURANCE. Let's get real here - insurance is boring. When planning a renovation, I'm sure you would rather look at countertop samples than read through insurance policies. But the truth is, if you don't have the right insurance in place - your renovation can cost a lot more than you're expecting!
A lot of people avoid the insurance conversation because:
a) the information can be overwhelming and;
b) the policies themselves can be hard to understand.
Not every situation is the same and both me (and your insurance broker) understand that. So I'm breaking it down for you, making it easier to understand the basics so you have the proper insurance in place BEFORE you start that renovation!
Note: You should always consult with your insurance broker about the best policy for your needs. The tips listed below are to act as a guide to conversations you should be having with your insurance broker, and are not to replace the advice of a professional.
Tips for Homeowners
1. Your insurance broker or agent needs to be advised if there are any structural changes/additions or any type of changes that would affect the value of the home. This includes upgrading flooring from carpet to hardwood, but isn't necessary for things like changing the paint colour. Adding a bathroom, finishing the basement, and other big changes should be advised to your broker PRIOR to beginning construction. If the policy requires an amendment to allow permission for renovations in order to cover the materials should something happen before the project is complete, and you don't advise your broker - you aren't covered.
2. Depending on the size of your renovation – you may need a course of construction policy in place until construction is complete. Course of construction policies are different than a regular homeowners policy.
3. Failing to advise the insurance company of major changes to the home would be considered a material change in risk and could potentially leave you with insufficient coverage or, in some cases, no coverage at all.
4. If you're not going to live in the home during the renovation, the insurance company needs to be advised and they will determine if they will allow a vacancy permit on the policy to continue coverage. In this case, when a home is vacant, the coverage is usually limited to specified perils, with things such as vandalism and water damage being excluded. This is because the risk of a claim and the size of the claim is expected to be larger due to the fact that no one is at the property on a regular basis. Failure to advise the insurance company that the home is vacant would leave the homeowner with no coverage in the event of a claim. (Vacant means the home is not occupied for 30 days or more)
5. When purchasing an older home: Insurance companies usually require updates to the heating system, electrical panel (min. 100 amps), roof, and plumbing (including hot water tank). If you're buying an older home without these updates and planning on renovating, some insurance companies will allow them to be insured prior to being updated, but will usually require proof of updates within a particular time frame or the policy will be cancelled. Meaning if you buy, you have to renovate right away. Most insurance companies will not insure a home that is being purchased to renovate prior to moving in (meaning it will be vacant when policy starts), unless that homeowner has existing property insurance with the same company.
6. A lot of first time homebuyers end up in this tough spot where they are currently renting and not carrying tenants insurance. Then they purchase an older home with the intention of renovating for a few months prior to moving in to it, and find out most companies won’t insure them when they try to apply for insurance. They usually end up having to get insurance through a high-risk market with limited coverage and higher premiums. Make sure you have insurance - even if you're renting!
Tips for Condo Owners
1. If you are doing renovations to your condo, insurance is your responsibility - not the responsibility of the condo corporation. The condo corporation's policy typically only covers the building to the specifics of when the dwelling was first constructed. This means if you bought a condo that was built in 1990 and originally had linoleum and carpet when it was new, under the condo corporation’s policy that’s what you will get if the condo burns down (even if you put in $30,000 to upgrade to slate and hardwood). You need to add these upgrades to your personal policy.
2. All condo corporation bylaws are different – so it is very important to read the insurance section to determine what exactly the condo unit owner is required to insure to make sure that you would be fully covered in the event of a loss. Any changes to your condo could affect your coverage, so even if you’re unsure, you’re better off just advising your broker and they can let you know if any changes are required on your policy.
3. Same as homeowners, vacant condos are not permitted unless the insurance company allows it, so if renovations are being done to a condo and no one is living there at that time, the insurance company needs to know and amend the policy or there will be no coverage.
Tips for Flippers
This is where things can get a little tricky. Most insurance companies would require a commercial insurance policy for this situation as the property is more of a business asset than personal property UNLESS you are living in the flip while renovating.
Things to consider if you’re buying an older home to renovate and flip:
1. When were the last updates done to the home for roof, furnace, hot water tank, electrical?
2. Does the home have a past history of a certain type of loss (ie: sewer back up) and if yes, have preventative measures been put in place (ie: sump pump)?
3. Find out from your broker if you are required to move in to the home right away, or if you can complete renovations first.
4. Find out from your broker if your coverage will be limited depending on the types (size) of renovations you plan on doing.
5. Get a quote from your broker on the cost of insurance on the home and inquire about ways to reduce premium. For example, if you're going to be finishing the basement or doing renovations to the basement, this would be a good time to get a mainline backwater valve installed to prevent sewer back up. Homes with this device usually get a discount on premium if it has been professionally installed and it will lessen the likelihood of a sewer back up loss that could increase their premiums in the future.
So there you have it! There is so much to consider with insurance that we can't possibly cover it all in one post. But this list should definitely get you started to having the right conversations with your insurance broker for your next renovation.
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