Home renovations come in all shapes and sizes. Something simple like a kitchen or bathroom remodel can be done while you are still living there, while more complex structural renovation projects require the homeowner to move out and call in professionals like architects and engineers.
In most cases, you will also probably be hiring a contractor for your renovation project. Outside of the basic things like proper planning, budgeting, contractor selection, and getting details in writing, there are a few things you should know when hiring a contractor about insurance for renovations.
Inform Your Insurance Provider
Shopping for new flooring or décor is certainly more fun, but you need to include insurance details early on in your planning stage. Most people skip this step, but remember when you are making changes to your home, you are making changes to the thing your home insurance policy is insuring. If you do not inform your provider before starting renovations, they could deny your claim.
This is especially important if you are going to be making structural changes or adding something like a pool, fireplaces, or a rental suite that can increase the risk of loss to the insurance company. If you do not inform your insurance company of these material changes in risk and a loss occurs as a result of these changes, you may not be covered. In addition, if you are making changes that will increase the value of your home, you will want to update the amount of insurance provided by your policy to ensure you have adequate insurance.
As an added bonus, if your renovations involve updating your roof, wiring, plumbing, heating, or security systems, you could even save money on your insurance premiums after notifying your insurance company or broker!
Depending on the nature of the renovations, you may need to move out of your home until they are completed. If you are away from your home for 30 days or more, it will be considered vacant and a violation of your policy terms. That means if a loss occurs while you are away, it would not be covered.
Vacancy is a very serious matter when it comes to insurance. If you are going to be away for an extended period of time, you will need to ask your insurance provider for a vacancy permit to ensure there is no interruption in your coverage. Note that a vacancy permit will have less coverage than your typical homeowner's insurance policy.
A vacancy permit is essentially an add-on (in insurance terms, we call it an endorsement) that extends coverage to homes that are vacant or unoccupied. These permits are usually set for a specific length of time and features reduced coverage. Other types of vacancy permits also make you cover part of any fire loss in order to mitigate concerns around insurance fraud.
Course of Construction Insurance
If you are making major structural changes to your home, your standard home insurance policy may not cover it. Speak with your insurance provider to see if you need to take out a “course of construction” policy. A course of construction policy (sometimes called builder’s risk insurance) is a specifically designed insurance for renovations policy that insures buildings that are under construction and will have coverage and terms tailored to that specific need.
Builder’s risk insurance comes in many forms and can be purchased by both the general contractor in charge of the project or the building owner who hires the contractor. This type of insurance protects the property that is under construction, materials that will be used in the project (things like roof shingles), as well as any landscaping or temporary structures that are necessarily erected to complete the project.
It will not insure against any faulty workmanship or cover the contractor’s own tools and equipment so make sure they have their own insurance policy for that.
Generally speaking, contractors are liable for their own mistakes. Part of the standard vetting process for a contractor will involve checking their insurance policy to see if they have insurance protecting their workers, tools, craftsmanship, and so on. But if you’re prudent, you should also check to see whether your home insurance policy includes third party liability coverage. If possible, you should always request a certificate of insurance from your contractor to ensure your interests are protected.
You could be found liable for any damage done by your contractor if you were not careful in selecting the contractor, assigned them unreasonable or dangerous work, controlled the way they worked, or supplied materials that were defective.
A professional contractor should have insurance covering their tools and equipment as well as any materials they will be using as part of the project (i.e. lumber, etc.). In addition to this, they should carry third party liability insurance to ensure you, your neighbours, and any third parties are protected from their mistakes. If your project is large enough, you might even want to look to make sure your contractor is bonded as well.