Remodelling Your House
There’s nothing wrong with dreaming of a bigger bathroom, an open-concept kitchen or brand-new hardwood floors. This dream of a renovating a home is what prompts more than 40% of Canadian homeowners to bite the bullet and live through the dust of a home remodel.
According to a 2015 CIBC poll, conducted by Nielsen, the average remodel budget lies somewhere between $17,000 and $20,000, with only 16% of those planning to undertake a major renovation that will cost $25,000 or more.
"Prioritizing where to spend your home improvement dollars is smart, but before you begin, you should make sure that you have a clear plan in place and access to the funds that you need to get the job done," says Barry Gollom, vice president, Mortgage and Lending at CIBC.
While a budget, material list and project timeline or integral factors to any successful renovation, it’s also important to make sure you have the right insurance coverage. Problem is most homeowners are completely unaware of how a home renovation can impact their current home insurance coverage.
Be proactive before you start the reno work
When starting a home renovation, many people don’t realize that even simple updates and remodels and impact the safety of the home—and potentially void the home insurance policy. For instance, some policies have limitations around specific types of updates, and you may be required to obtain written permission from your insurer before starting a project. Another obstacle is if a renovation requires you to vacate your home for a renovation. You’ll need to talk to your insurance company before leaving your home, to determine if an extended absence is in violation of your policy terms. In some cases, you could even void your home insurance policy if you’re away from your home for more than 48 hours. Call your independent insurance broker to get the full details of how to protect your house and your home insurance coverage.
Why the concern? Because you never know what a renovation or remodel will uncover. For instance, exposed electrical wires could prompt a fire, while holes in the roof could cause flooding and massive damage to internal walls and floors. Insurance companies consider this type of damage to be preventable, so very often they won’t honour these types of claims. But notify them of your plans and, for a small cost, you can keep your coverage even during the biggest of renovations. For instance, you can pay for a vacancy permit if a major renovation forces you and your family to leave your home while it’s being renovated. "It might cost $20 or $50 more, but it's worth it," says Thomas.
Tips for those that have completed their renovation
Ask anyone that’s updated the kitchen or renovated the bathroom if they’ve called their insurance provider and they’ll probably look at you like a deer in headlights. That’s because we tend to forget that we pay for insurance to replace or repair what we own—and the ownership of our house never changed.
But when a homeowner remodels or renovates they could be substantially altering the value of what they own—and this has a direct impact on what’s covered in the event of loss or damage.
"Something as simple as updating the kitchen and the bathroom can add thousands of dollars to your home in terms of replacement value," says Thomas. "Your insurance company may want to be provided with receipts, because if, heaven forbid, the home burns, how do they know you just renovated a $5,000 countertop?"
Notifying your insurance provider that you’ve renovated your home will probably mean an increase in your annual premiums. If that frustrates you, consider how you’d feel if you were to complete the renovation, only to have a catastrophic fire destroy all your hard work. While your insurance provider would cover the cost to replace your kitchen, they won’t cover the costs to replace the updated kitchen. Remember it’s a lot easier to pay an incremental increase on your home insurance premium then to watch a $45,000 kitchen renovation go up in flames and smoke.
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