Rising home prices have been an issue across Canada for some time now, especially in some of the nation’s hottest markets. However, there are changes individual homeowners often make that can significantly increase the values of their own homes even without a significant uptick in average prices in their neighborhoods. That, in turn, comes with unique insurance issues they will have to address.
Those who renovate their homes can end up altering their insurance situations considerably, especially if they’re tacking on an addition, finishing a basement, or redoing a kitchen or bathroom, according to a report from the CBC. The mistake many homeowners make in this regard is that they often do not let their insurance companies know about the changes. In many cases, if there is a fire, flood or other accident sometime down the line that causes significant damage to the added or redone rooms, it might not be covered by their unaltered insurance.
“If you’re adding living space by finishing your basement, you’re adding value and costs,” Pete Karageorgos, director of consumer and industry relations with the Insurance Bureau of Canada, told the news agency. “You need to let the insurance company know you’ve updated the countertops, put in natural stone or upgraded the cabinetry.”
Why it’s important for additions
Adding onto a home or property to make it bigger is far more likely to change the value of a property considerably, the report said. So if an addition to a home is damaged, and an insurance company doesn’t know about it, that might not just leave homeowners in the lurch when it comes to covering the cost of the damage. In some instances, insurers might choose to simply refuse coverage altogether.
“If you have a bigger home than what you’ve told the insurance company you had, when you have a claim and the insurance company discovers that material change in risk, that’s a no-no,” Karageorgos added. “The company may decide not to pay the claim, or they may cancel your policy, or pay the claim and deduct what the additional cost of insurance would have been had you been honest with them from the word go.”
What can happen?
Highlighting why this is so important is an incident observed a few years ago in Toronto, according to a separate CBC report. A home in the city’s West Toronto neighborhood had to be knocked down as a result of damage done to its foundation during renovations being made to its basement. The home was immediately damaged, and so badly that city officials wouldn’t even let the owners go inside to get their possessions. It was unclear whether the owners alerted their insurers about the planned renovations, but the extent of their loss was significant, to say the least.
The more homeowners can do to consistently review how their insurance needs have changed since the last time they renewed their policies, the better off they will be in terms of protecting themselves financially if something were to go wrong in this way.
“There is also an increased potential of damage when a home is under renovation especially when utilities such as plumbing, electrical or heating are involved so homeowners must also advise their insurance company of this work even if they don’t think it will affect the overall value of their property,” says Karen Roller, Underwriting Director at APRIL Canada. “Some changes may increase premium or make coverage ineligible, such as changing source of heat, which is best to consider before plans are finalized. Other considerations also include ensuring your licensed contractor has the proper insurance as well as credentials for the job at hand.”