Thursday, May 23, 2013

The five most important things to know before you reno



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.
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