Home renovations rarely go as planned. The job always takes
longer, costs more and makes you waaay crazier than your HGTV-fueled dreams can
ever account for. Maybe that explains why, according to a recent TD poll, many
homeowners forget one very important thing. No, we’re not talking about the
latest fixtures or low VOC paint. What most of us are actually forgetting is
how renovations will affect our home insurance policy.
Research from TD Insurance found that only 6 percent of
homeowners checked their policies before pulling out their toolkits.
Unfortunately, this means you may be putting yourself at risk if you have to
file an insurance claim. So, in honor of renovation season, let’s take a look
at some of the insurance issues homeowners should be aware of – and what can go
wrong if you get too focused on design and forget about the bottom line.
From renovation dream to financial nightmare
According to Dave Minor, a vice president at TD Insurance, homeowners
should contact their insurance provider before they start swinging a hammer.
Why? Because if you hit something you shouldn’t (ahem, a pipe), you might not
be covered.
Here are a few things you need to know about insurance when
you’re looking to renovate…
1) Beware of exclusions
Most of us probably don’t read our insurance policy, but if you
did (and should), you’d find a few clauses about renovations. Exclusionary
clauses. To be specific, your policy is likely to exclude certain kinds of
coverage when your home is under construction.
“Insurance is all about risk. When a home is under renovation,
that risk will change or increase depending on the magnitude of those
renovations,” Minor said. “Many companies will change the coverage during the
course of the renovations and may exclude certain perils, such as glass
breakage or water damage.”
What that means is if you’re demolishing your bathroom and hit a
pipe in the process, it might just be your problem. The same thing can happen
if you leave your house vacant while having the work done; not being home can
negate some of your coverage. To avoid this, consult with your insurance
provider before you dig in, to ensure you’re covered.
2) It won’t cover you for amateur mistakes
We’re all for DIY. Putting in a little sweat equity can be a
great way to cut your renovation costs and boost the value of your home. But
some things are better left to licensed professionals. This is most important
for tasks where building codes apply - think plumbing, electrical and construction.
Not only are these jobs often technical and complicated, but the stakes are
high: Do them yourself and you may end up in a scene from the “The Money Pit” –
with no insurance coverage to take care of the damage (and no Tom Hanks to hold
you tight and tell you everything will be okay). If you want to get your hands
dirty in your own house, choose something where the consequences will be less
catastrophic (say, with a paintbrush).
3) You should be concerned about contractor injuries
Speaking of professionals, you should look for one when it comes
to any kind of contractor you hire, preferably one with liability insurance,
Minor said.
“If they or one of their employees gets hurt while working on
your property, their insurance should cover any liability,” Minor said. “If
they don’t have that, you as a homeowner may be responsible for the liability
costs associated with a contractor’s injury.”
Don’t leave this to chance, Minor said. Ask to see your
contractor’s certificate of coverage.
4) A fresh look may require a fresh insurance policy
We often renovate our homes for the thrill of tossing ugly old
decor away in favor of something we love, but there’s often a financial
motivation as well. A more updated, better maintained home can be worth a lot
more when you go to sell. But what many people forget is that when their homes
are worth more, this can mean they need more insurance coverage too. When you
ditch linoleum in favor of hardwood and replace laminate with granite, the
value of your home increases, which means any insurance claim you may have to
make is likely to be higher as well. This is especially true with major
renovations, like additions. You may not have to pay higher premiums, but it’s
a good idea to check with your insurance provider to ensure your home’s fresh
new look has a policy to match.
5) Some renos can cut your premiums
While many home improvements have the potential to boost your
insurance premiums, there are some that can reduce them. These may include
installing a security system, waterproofing the basement, replacing your roof,
or updating outdated plumbing or wiring.
“Insurance premiums are related to risk, so think about the
things that will reduce that risk,” Minor said. “Every company is a bit
different, but wherever you can reduce the probability of having to make a
claim, there’s a good chance that will help reduce your premiums.”
Go forth and renovate
Whether you’re looking to take on a small update or a major
renovation, add insurance to the list of things you need to tackle. It might
not be as exciting as drafting plans and picking out paint colors, but if
there’s anything a home renovation doesn’t need, it’s an unpleasant surprise.
Renovating provides enough of those as it is.