No one wants a visit from Crappy McCrapperson this spring
As the weather improves, many homeowners start planning major remodeling or renovation projects. According to Statistic Brain, in the next two years 26% of homeowners plan a bathroom renovation or addition and 22% plan a kitchen renovation or addition.
However you choose to remodel, keep this in mind: The homeowner, the general contractor and the subcontractors—plumbers and electricians, for example—all need insurance coverage.
Review your homeowners insurance
Contact your home insurance carrier or broker to confirm whether your policy covers your home and property while it’s being remodeled. For example, if you have to move your furniture out of the rooms that are undergoing renovations, consider getting a storage container to put in your driveway. I rented a 40-foot unit when I added a second floor to my single-story ranch and filled it with furniture and everything from my attic.
Your homeowners policy should cover the contents in the container, but confirm the coverage with your broker. If you don’t have room for a container on site and you put your belongings in an offsite storage unit, you may need a separate policy.
If you’re planning to do the work yourself, your first call should be to your broker. Some remodeling projects if not undertaken correctly may void your homeowners policy.
Many contractors have general liability (GL) insurance designed specifically for remodelers, which covers the GC for accidental injury to someone other than a worker or himself (many GCs are small businesses, operated by their individual owners with a few workers). For example, a delivery driver may trip over the GC’s materials and be hurt in your driveway. The GC is responsible for that injury, not you.
Generally, the GC’s liability policy excludes coverage for tools and equipment. The GC and the subcontractors should speak with their brokers about the best way to cover equipment and tools, which can easily be damaged, lost or stolen. In one case the GC’s employee left an expensive, new hammer in the wall between the studs and covered it up with dry wall. No one knew what happened to the hammer until three years later when the GC worked on a project for the same homeowner and found the hammer. (Yes, it happened on one of my remodeling projects.)
You haven’t filed any claims, so why is your home insurance going up? It’s a common question that boils down to insurance trends. Insurance rates are based off more than just your personal claims history. They also take into account your company’s claims experience and the types of claims they commonly deal with.
Here are five reasons why your home insurance may be going up—and one easy way you can save on your home insurance.
1. Worsening Weather Conditions
Flooding. Winter storms. Freezing rain. Downed trees. Canadian weather has no doubt become more severe over the past few years. This means insurance companies are paying out more than ever for weather-related claims, an expense that is passed on to all insurance policyholders.
To put it in perspective, the 2013 ice storm in Toronto caused more than $200 million in insured losses, while flooding in Alberta cost $1.7 billion. In total, weather was responsible for $3.4 billion worth of insurance payouts in 2013. In fact, Intact reports that between 2006 and 2012, “the amount of insurance damage resulting from extreme weather in Canada increased by over 650 per cent.”
Insurers have responded not only by redistributing some of these costs among all policyholders, but also by looking into or changing the coverage offered for weather-related claims. Homeowners are advised to carefully review their policies to learn what is and isn’t covered in regards to weather.
2. Bigger, Better Homes
Homes are getting bigger. According to the Canadian Mortgage and Housing Corporation, homes have almost tripled in size from an average of 800 square feet in 1950, to 2,300 square feet in 2005. These days, homes average around 1,900 square feet.
Your home insurance is not based on your house’s market value. It is based on the cost of rebuilding and replacing your house. Basically, the bigger the home, the higher the replacement value which in turn translates to higher insurance premiums as well.
In addition, many people are now installing more high-end fittings. The current trend in granite countertops, for example, costs much more to replace than the old types of countertops.
3. More Contents
The same goes for contents. Bigger homes often require more furnishings. Add to this the popularity of big ticket items such as media equipment, wine cellars, and finished basements, then your contents are going to cost more to replace, so your insurance is going to cost more as well. It is not uncommon for people to have more than one television and more than one computer, laptop or tablet, and top of the line appliances and household furnishings that all add up.
4. Finished Basements
Finished basements are actually a relatively new phenomenon. It used to be that basements were a place for laundry or pantry storage, but now basements operate as extensions of our living spaces. People are putting more money than ever into their basements. HGTV quotes the average basement remodel at $61,303. This adds value to a home. It also makes basements and the contents more expensive to replace/repair in the event of a claim.
Basements are actually a large contributor to home insurance claims, as water damage can ruin media and entertainment rooms, expensive flooring, and even living spaces. Homeowners are advised to take action against basement flooding by installing sump pumps and taking other precautions to minimize risk, such as not storing expensive technology close to the floor. If you plan to finish your basement, make sure you address all problems with moisture first.
5. Old Infrastructure
Aging infrastructure is an increasing problem contributing to sewage back-ups and basement flooding. Robert Tremblay, research director at the Insurance Bureau of Canada, told the Globe & Mail that claims for sewage back-ups have doubled in the past 11 years, something insurance companies are now factoring into their risk assessments. The Canadian government has committed to putting $53 billion into infrastructure over the next 10 years, but in the meantime sewage back-up is still a risk for homeowners across the country.
Homeowners should note that sewage back-up protection isn’t automatically included in a home or tenants insurance policy. It is actually an add-on offered by many insurance companies for an extra cost.
Foolish us: We bought a house. We should have been thinking about insurance, because, a few weeks in, I never want to have to think about insurance again.
Short version: We went to our insurance agents to insure the new place, and they offered to take it on for close to triple what we pay now, the equivalent of the price of a small used car every year.
Now, insurance costs are going up generally; anyone who pays the bills has been noticing that, even if you’re lucky enough to have no claims, the tab keeps rising and rising.
The industry says the increased costs are the result of extreme weather connected to global warming. Storms are going to be a lot more violent; there’s going to be more wind, stronger wind and heavier rain; the rain will also fall in shorter periods (translation: Flooding).
And that means more costs for insurance, you see.
Well, we own nothing on a flood plain.
That being said, all the rain in the world should make not one whit of a difference to my insurance. Here’s a snippet from a major Canadian firm’s website: “The most common exclusion under a home policy that would be considered an ‘Act of God’ is a flood. No insurance company in Canada offers flood insurance under a home policy.”
Perhaps, we thought, another agent will solve the problem.
Like the ones who were already insuring the house we bought.
Hallelujah! A price similar to the old house, only 10 per cent higher.
Finally — insurance for the house.
Ah, but then throw in the complication of a summer cabin. (In Nova Scotia, a cottage. In New Brunswick, it would be a camp.) Properties that are well outside St. John’s can be found for reasonable — sometimes extremely reasonable — prices.
Insuring, them, though …
Having escaped the price-of-a-small-car home quote, imagine my surprise at finding that insurance company No. 2 would be delighted to insure the summer place as well, but only after setting a replacement value for the place. They determine the value based on square footage and age — and, what do you know, they value the spot at more than three times what it actually cost to buy. Meaning its insurance will be three times what it is now. (Echoes of the first insurance company ring in my ears.)
No problem, says I, let’s just insure it for the purchase price.
Insurance company No. 2: No. We don’t do that.
I resist the urge to say: “I accept your offer. Pay me more than three times what I paid for the place, and it’s yours. I’ll throw in the mower free.”
I do point out that I could buy four vacation properties for what they have valued the existing one at.
Back to insurance company No. 1: Will you keep the insurance on the cabin? No, we won’t insure your vacation property if you don’t pay a small car for the main house, too. Any way you slice it, and everywhere you go, we want the price of a car.
I’m still looking.
Disclaimer: No adjusters were injured in the writing of this column. No matter how much I wanted to injure a few.
Are you covered?
Halloween and Bonfire Night create lucrative opportunities for thieves, so knowing your insurance rights and taking precautions to protect your home are vital.
The end of October and start of November are particularly fruitful weeks for burglars as they look to take advantage of big events to catch out unsuspecting households across the country.
Tips to keep thieves away
With this in mind, here are some handy tips to help keep your home safe at this time of year.
- Install outdoor lighting as this gives potential burglars less places to hide.
- Lock your windows and doors even if you’re in.
- Don’t leave keys hidden outside, near the door or anywhere easily accessible from the door.
- Get an alarm system fitted as it’s likely to deter thieves.
It’s also worth being wary of distraction burglars. These criminals use a seemingly honest cause to gain entry to a homes before stealing items while the occupant is distracted.
Bogus callers could invalidate your home insurance and some home insurance providers won’t pay out for theft unless there is proof of forced entry, meaning opening the door to these criminals could leave you unprotected.
To be safe, double-check what cover your policy provides and be extra cautious about letting strangers into your home.
For more pointers on keeping your home and possessions safe read our guide to making your home burglar proof.
It’s also key to keep an eye out for vandalism during the spooky season as insurers report more claims for damage to cars and homes on Halloween.
Malicious damage and fires should be covered as standard on your building insurance, and on your car insurance providing you have a policy covering third party, fire and theft.
But it pays to take care to avoid the expense and stress of having to make a claim.
Popular claims around this period are for smashed windows and damage to doors and garden property.
Although many police forces will increase their patrols during this period, here are some things you can do yourself to reduce the risk to your property.
- Park the car in a garage for the night.
- Move garden ornaments and any other items out of sight, perhaps in a locked garage or shed.
- Leave on lights, the radio or television when you’re out to make it appear as if someone is in.
- Ensure sheds, garages and other out-buildings have robust locks.
- Don’t answer the door to trick-or-treaters if you don’t feel comfortable doing so and place a note or poster, such as this one from Gloucestershire police, on your door if you do not wish to have any visitors on Halloween.
Stay protected from thieves
Gareth Lane is head of home insurance at Confused.com.
He says: “Due to the seasonal spike in crime it’s especially important to take steps to ensure you and your home are properly protected.
“Alongside measures to keep thieves away and deter vandals, having home contents insurance is of primary importance.
“Otherwise you may be forced to cover the cost of any loss or damage as a result of a burglary, for example, out of your own pocket.”