What you need to know about your home insurance before you give that basement a makeover.
Canadians love renovating. In 2013, residential renovations reached some $64 billion—more than the amount spent on new residential construction, according to a 2014 report by Toronto-based Altus Group. The group forecasts that number will be even higher in 2015—estimating a total spend of just over $67 billion.
Topped only by bathroom renovations, basement renovations are the second most popular home fix in Canada, says a survey conducted by TrustedPros, a national contractor referral website. And they're the most popular reno in Newfoundland and Labrador, Saskatchewan and Alberta.
Renovations are popular because they often give homeowners a hefty return when it's time to sell their property. But before you convert your basement into the man cave or rec room of your dreams, there are a few things you should know—especially when it comes to your home insurance.
Tell Your Insurance Provider
Before doing any major renovations to your home, make sure you give your insurance provider a call. This will help ensure you're properly covered during the renovations and long after the renovations are complete.
Depending on the extent of your renovations, you may have to change your policy to a home under renovation policy or a builder’s risk policy.
- Related Read: Collapsed Houses: Will Home Insurance Cover It?
This is especially important if:
- You are underpinning your basement
- You won’t be living in your home during the renovations
Make Sure All Contractors Have Liability Insurance
You may think you're covered if a contractor gets injured or killed on your property, but the truth is you could be found liable.
This is why it's crucial to ensure any builder or contractor has their own liability insurance before they begin working on your home. Ask to see their insurance policy to ensure you're covered in the event something happens to the worker, your property or surrounding property. Otherwise, you may end up being forced to pay for medical bills, lost wages and/or damages out of your own pocket.
What to look for in a contractor's insurance policy:
The Canadian Home Builders Association recommends you check your renovator's proof of liability insurance—either through a copy of the policy or a certificate of insurance—to ensure it includes:
- General liability insurance
- Minimum coverage of $1 million
- Includes coverage in the event of damage to your home or neighbouring properties as a result of renovation activity
- Includes coverage for bodily injury caused to a third party
- The expiry date of the policy
- Proof of workers' compensation for employees of the renovating/contractor company
If you're doing DIY renos
If you plan doing some of the renovations yourself—or acting as a general contractor and hiring people to work for you—you should also check with your insurance provider as there may be an exclusion related to professional liability. In this case, you may need additional coverage during your renovation to protect you in the event someone is injured while working on your project.
Preventing Water Damage
Finished basements can mask water damage caused by mold, mildew and humidity from numerous problems including burst pipes, malfunctioning sump pumps, and water drainage backup.
To prevent water damage when renovating your basement:
- Ensure any previous water damage is taken care of and your space is properly dried out before you begin new renovations
- Check for any cracks in the walls or floors that could allow water or moisture to get in—then have your basement waterproofed if need be
- Divert water away from the foundation of your home and ensure your gutters are free of debris
- Make sure your sump pump is in working order
- Consider the flooring you'll be installing—look for manufacturer-recommended flooring for below-grade installation
- If you're installing carpet, easily-removable rubberized-backing may ease additional concerns
- Use stainless appliances with stainless steel-clad hoses, which are less likely to burst than rubber ones
How Renovations Affect Your Premiums
Renovations can increase your selling price, but can they also increase your premiums? The short answer is yes.
Your premiums may increase during the course of your renovations to cover additional risks, and they may increase after if your renovations have increased the replacement value of your home.
But, depending on the renovations, they could also decrease. Upgrading an electrical system, for example, could lower your rates.
To find out more about how your renovations could affect your premiums, have a discussion with your insurance provider before you begin. This will help you understand what is and isn't covered while also making you aware of exactly what you can expect from your home insurance rates once your renovations are complete.