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Home improvements and how they impact home insurance

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This pandemic has motivated many Nova Scotians to tackle home improvements, whether it is an updated bathroom, a new roof, or a backyard hot tub. According to Abacus Data, almost 1 in 2 Canadians have already done or planned home renovations during the pandemic.

Insurance is an often-overlooked aspect of the home renovation process. In this blog post, we will take a closer look at home improvements from the perspective of home insurance costs. What will decrease your premium, increase it, and why it is so important to inform your home insurance provider of your home improvements.

Six home improvements that could lower your home insurance

Let’s start with the good stuff. Here are six home upgrades that could potentially make home insurance less expensive while improving a property’s value and livability.

1. A new roof

A new roof could reduce costs for a few reasons, depending on the situation. Suppose the property had an older roof that was replaced with a newer one. In that case, the policyholder could qualify for a roof age discount. Beyond the obvious benefit of preventing major water damage from a leaky roof, a new roof can also help protect against lightning damage.  A new roof is one of the best ways to reduce your home insurance premium.

2. Upgrading windows

Storm or impact-resistant windows reduce the likelihood of damage by wind and rain, which are two leading reasons for homeowners’ insurance claims. This type of upgrade will have the most significant impact on premiums for homeowners who live in areas routinely affected by windstorms.

3. Exterior and garage doors

New and improved exterior doors and garage doors can have a similar effect on reducing damage claims as a new roof or impact-resistant windows. While these upgrades can be expensive, they can reduce the insurance premiums paid overtime by making damage to a home less likely to occur.

4. Home heating, cooling and electrical systems

For homeowners with older homes, updating the electrical and heating system can reduce the chance of fires or flooding. This, in turn, can lead to reduced home insurance premiums. It can also cut energy costs so that it can pay off for homeowners in two ways.

5. Emergency water shutoff devices and backwater valves

Most insurance policies cover damage resulting from water leaks inside the home. Some examples of this are a leaking refrigerator line or damaged pipes. Homeowners are encouraged to consider installing devices that detect when water leaks and shut off the water supply, limiting the damage.

A sewer backup (or backwater) valve is a plastic box that attaches to your main underground drain out to the city’s main drains. Typically, this box operates just like an extension of your drain. When enough water flows into your house, the backup valve lifts, preventing any water from flowing in or out. If your home is attached to the city water main and the drain backs up, you’ll be happy knowing you’re protected.

6. Home security system

Home insurance policies generally cover theft as well as damage from vandalism. A home security system reduces the chances of either type of damage occurring. Many systems also include other types of monitoring, such as fire detection. The alarm company can take swift action to alert the appropriate authorities when something goes wrong. Because a security system can protect against many expected losses that result in insurance claims, adding one can produce savings in home insurance.

Renovations that can increase your home insurance costs

Unfortunately, not all home improvements will save you money on your home insurance. While the following items are sure to add to your home living experience, these improvements are likely to add cost to your home insurance.

  • Kitchen and bathroom upgrades. Kitchens and bathrooms are two of the best ways to increase the value of your home. If your home increases in value, then the replacement cost will be adjusted upward, increasing your insurance premium cost.
  • Hot tubs and Pool. Pools and hot tubs are a liability and generally will increase your monthly costs.
  • Home-based business. Converting a bedroom, basement or garage to a home office or workspace will require you to have home-based business insurance.
  • Additions. Adding square footage will increase your rates because you will need to bump up the included replacement value.

Letting your insurance provider know when you make home improvements

Home renovations can be a great way to build value in your home and make it your own. However, you can get so busy with renovations and the day-to-day details of life that you may forget to inform your insurance company. It’s a common mistake – but it’s a considerable risk that could void your home insurance if something goes wrong.

It is wise to include your home insurance provider in your renovation plans. While your home insurance may cover renovations, it’s a good idea to review the specifics of your plan before you start. Remember that some home renovations may reveal other hidden issues once you start work, such as mould or faulty wiring. Uncovering such unexpected problems may change the insurability of your home.

Are you well protected during your renovations?

Your home insurance may offer personal liability insurance, offering coverage if anyone is injured during renovations. However, when hiring tradespeople, always ensure that they have the appropriate coverage, such as those through the Nova Scotia Workplace Safety and Insurance System.

Extensive renovations and updates may require your home to be unoccupied for some time, which is vital to share with your insurance provider. Typically, home insurance dictates how long you can be away while still maintaining your coverage. Suppose a renovation is longer than that period. In that case, you may need to request a vacancy permit from your insurance provider, which will maintain coverage despite your absence.

Post-renovation home value and replacement cost

Often, homeowners don’t contact their insurer after a renovation because they are worried about their increasing costs. Depending on what work you get done, your costs may lower. If they do increase, it’s likely because of the increased replacement value.

For example, let’s say your house is worth $350,000. You then decide to do an extensive kitchen renovation that increases the room’s size and uses higher quality materials. Your house may now be worth $400,000 or more, and this should be reflected as the replacement cost in your home insurance policy.

Regardless of where you live in Nova Scotia, your home is a major asset.  Properly insuring your home is critical to protecting yourself and your finances in the event of an unexpected incident.  Visit our web page to learn more about home insurance, read answers to frequently asked questions, or request a home insurance quote.

Additional Resources:

From Abacus Data.  The Reno Boom: How 1 in 2 Canadians are Investing in Home Renovations during the Pandemic