Marsh Insights: Home Valuation - Update Your Insurance When You Update Your Home

 

You’ve hired the contractors and picked out tiles, cabinets, and fixtures, but there’s another important item for your renovation to-do list—and it’s even more important than deciding whether to paint the walls moss green or aubergine. Review your home insurance policy and call your insurance provider.

 
You could be in for an unhappy surprise if your home isn’t insured according to what it would cost to rebuild it after a natural disaster. And with severe weather on the rise across the country, it’s becoming even more important to update your policy when you renovate.

In fact, your policy requires that you inform your insurer before any material changes are made to your home. Even a minor do-it-yourself renovation could affect the value of your home. For example, it could increase the risk of fire or water damage.

Your insurance representative will be able to answer your questions and put your mind at ease. Taking a few moments to review your policy and consult with your broker or agent will give you peace of mind as you complete your dream renovation.

Why is it important to check that I have enough insurance?

Your home is your most valuable asset. With severe weather on the rise, it is more critical than ever to ensure that your home is properly protected. If your home is damaged or destroyed, it’s very important that it is insured to its accurate replacement value.

Your possessions are affected. Most homeowners’ policies cover contents up to a specific percentage of the total insured value of the home. If your home is not properly insured, you may not have enough insurance to cover its contents in the event of serious damage.

You have contractual obligations. Under your insurance policy, it is your responsibility to report any changes to your property, such as renovations or additions, to your insurance professional. In addition, making sure that your insurance company has an accurate and up-to-date description of your home can help speed up the claims settlement process after a loss.

What is the difference between replacement cost and resale value?

Replacement cost is the cost of rebuilding your home in the event that it’s destroyed. It includes things such as the price and availability of skilled labour, debris removal, extra expense due to more demanding building codes, and more. Upgrades, renovations and other improvements can also make rebuilding a home more expensive than originally estimated, affecting the final replacement cost.

Resale or market value, on the other hand, is based on a number of factors that have no direct correlation to your home’s replacement cost (in other words, the cost of reconstructing your home). These include location, land value and the amount paid for surrounding homes.

Why is the replacement cost higher than what I paid for my home?

The replacement cost may exceed what you paid for your home for a number of reasons:

  • Your home may need to meet newer, more demanding building codes.
  • The cost of demolition and preparing the land to rebuild is factored into the replacement cost.
  • Using materials of similar quality to rebuild your home may cost more due to the current prices of these materials.
  • A contractor rebuilding a single home won’t have the same cost efficiencies as a builder constructing many homes in a development.
  • Following a catastrophic event such as a wildfire, labour and building materials may be scarce, resulting in inflation of the costs of construction.

Know Your Home

Most policies operate on an annual basis. Each year when your insurance policy comes up for renewal and before you contact your insurance professional, make a list of key details about your house.

Whenever you increase the value of your home through renovations or the purchase of expensive contents such as sophisticated electronic systems, notify your insurance professional. By doing this, you will continue to have enough insurance to cover you in the event of a loss.

Article reproduced courtesy of the Insurance Bureau of Canada.  www.ibc.ca


For more information on home insurance and car insurance insurance, or to obtain a no-obligation quote, please contact Marsh’s Private Client Services at
1 877 476 6727 or request a quote online at www.marsh.ca/quote.


For high net worth inquiries, please call 1 800 385 6619.