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.
By Noel Hulsman
| GoldenGirlFinance.com – Fri, 17 May, 2013 4:29 PM EDT
