Home Renovation Insurance

Experienced and trained General Contractors can be worth their weight in gold. However, sometimes we wish to save on construction costs or wish to maintain a higher degree of control over the project. When there is no General Contractor, the risk of loss and the likelihood of critical steps being missed in the finished product increases significantly. Insurers are never anxious to take on projects where the risk of loss is unnecessarily increased. Some insurers will write projects where you are acting as your own General Contractor, but they will need to see evidence that you have relevant knowledge and experience and that you will be taking additional steps to ensure building codes and proper procedures are followed. For larger projects, insurers will be extremely reluctant to allow you to act as your own General Contractor.

There are a number of items you should consider implementing during the construction process that will help you once the project is completed, some of the more common ones are:

• Generally, homes exceeding a rebuilding value of $1 million will require monitored alarms once completed to be insured at reasonable rates. Alarm system specifications and requirements will vary between insurers, you should discuss these requirements during the project with your broker. Local building codes are usually not as stringent on components as insurers may be, and you could save considerable cost by ensuring your system is installed satisfactorily. The larger the home, the more specific the alarm system requirements will be. Additionally, if installed during the build phase, it is much easier to run the wiring and ensure the units are installed in a more aesthetically acceptable fashion.

• Water losses continue to be the leading claims problem for clients and insurers. Many insurers are now recommending or even requiring that loss mitigation device be installed in new homes. It is easier and less expensive to install an automatic flow-based water supply shutoff device during construction than to go back and retrofit it once the project is completed.
• In larger homes, a sprinkler system can generally be installed for a relatively minor cost during construction and these systems can generate significant premium reductions that will offset the installation cost over time.
• Permanently installed automatic generators and video systems can also provide premium reductions after project completion, your broker can provide information on how your future premiums might be reduced
• Reverse slope driveways are problematic when seeking complete water coverages for a finished home. If your home will have a reverse slope driveway, installing specific drainage capabilities could help to ensure you can obtain proper water coverage once completed.

With construction risks, the risk increases exponentially as the project progresses, with the highest risk of loss being immediately prior to completion. The insurer will price your policy based on this understanding and by spreading the cost over the entire project this keeps costs at the tail-end down significantly. Additionally, this reduces overall costs as the underwriter does not need to make regular adjustments to your policy, ensuring that adequate coverage is always in force.

Contract prices are established at the start of construction, and for longer projects the effects of construction cost inflation will impact the insured value at the end of construction. Construction activity in Canada has been operating at a feverish pace over the past decade, and continues to outpace regular inflation by a significant margin. It is not uncommon for the rebuilding cost on a three year project to increase by over 15% by the time it is completed. Additionally, when an insurer calculates the required amount of insurance required, they are influenced by their particular contractual obligations in the event of a claim. They are often in a position of having to pay higher prices to ensure a more timely completion of a claim and do not have the option of shopping around for lower pricing.