Why are we doing renovations? In general, it is to improve our quality of life and the value of the house. Often, it is to improve energy performance, to save money and fight against global warming.
All of these questions have a direct impact on your home insurance. Because renovations inevitably increase the insurable value of the house by:
– more living space (addition of an annex, arrangement of the basement) and by the goods therein;
– the addition of superior quality finishes;
– the installation of new technologies (smart thermostats, probes, heat pump, energy-efficient windows, monitoring systems, etc.).
You think that inevitably the insurance premium will go up. May be. But not always: adding a backflow preventer, replacing a water heater with a retention tank and a safety valve, installing humidity probes or an alarm system, replacing the roof or the oil heating system with another electric one may reduce the premium!
Not the same house
When you buy home insurance, coverage and its price are set — based on the characteristics of the building when you shop. Renovations are a game-changer.
Imagine that you suffered a disaster (fire, tornado, flood) after renovating without notifying your insurer. This will compensate you according to the insured values and the conditions specified in the contract. You could suffer heavy financial losses …
Normally, if you are dealing with a contractor, they are covered by liability insurance (confirm this with them). If you are doing the work yourself, describe the site to your insurer to confirm if your personal liability coverage is sufficient, especially if you have help from your brother-in-law or if you hire day laborers.
ADVICE
- According to the Insurance Bureau of Canada, there are no exclusions from the home insurance contract for repairs that are not made by licensed professionals, including appliance repairs, and electrical or plumbing that you would undertake yourself. But for large-scale work, it is better to hire a contractor or specialists.
- If you do your work yourself, some insurance contracts provide for additions (endorsements) to cover your materials during the work.
- Some renovations do not improve the value of the home depending on the type of work, finish or fixtures, and the neighborhood where you live.
- The best way to finance — your renovations is to use a home equity line of credit. Your financial institution may be able to convert your mortgage loan into margin, without penalty, with a more advantageous rate …
- Plan for contingencies varying from 15% to 30%, depending on the complexity of the work. When renovating, there are ALWAYS the unexpected.
- Avoid mortgage insurance: increase your life insurance coverage instead.
- Create a logbook for your property: write down all major maintenance and renovation work. Keep and scan all invoices, maintenance contracts (heat pump, etc.) and calculate annual costs.
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