*Editor's note: this blog post was originally published December 20, 2012. Updated for your reading enjoyment!
Insurance can be a lifesaver. But if you're not keeping your policy up-to-date and your broker in the loop on changes to your home or new valuables, your home insurance may not be as effective as you'd like. If you don't want to be left holding the bag if disaster strikes, make sure your contents inventory is updated after major purchases, and inform your insurance company if you do any renovations or install upgrades like an alarm system.
Your insurance company helped you to assess your home when you first took out your coverage, so that it knew how to value your house and property. But a lot of policies automatically renew annually. This means that major changes, like renovations and big-ticket purchases, can end up pushing your home's actual value well beyond what you're currently covered for.
That's why the Insurance Board of Canada recommends keeping an up-to-date inventory of everything you own. At least once a year, you should go over your list of belongings and make sure to add and remove items to reflect any changes in your lifestyle.
Renovations can change your home's value
The Insurance Board of Canada explains that insurance policies are based on the replacement cost of your home; that is, how much it would cost to completely rebuild your house, not its market value. Replacement cost, unlike market value, doesn't take into account matters like housing prices, location and the cost of the land; but it does address concerns like debris removal and building codes, which aren't included in market value.
So while you may only be thinking of resale value when you start a major overhaul to your home, it's important to bear in mind how much it would cost to rebuild should tragedy strike. Upgrades like granite countertops, home theatres and new additions can significantly impact the bottom line. The replacement cost goes up, and so should your coverage, even if it means paying higher premiums. Otherwise, you may end up paying out-of-pocket for anything beyond what existed when you first signed your insurance contract.
Upgrades like replacing old lead pipes or replacing fuses with circuit breakers may help lower your premiums, since newer systems have a lower risk of causing disasters like floods and fires.
Turning up the heat
If you're thinking of installing a new furnace, it's essential to keep your insurance policy up-to-date, especially if you're changing the type of furnace. Oil furnaces, for example, may require a higher premium because the tanks can create some potentially expensive environmental hazards.
Wood stoves are a hot button issue for most insurers, and you'll want to make sure your insurance representative is kept up-to-date if you install or remove a wood stove, or make any major changes to the stove or its chimney.
Alarm systems offer security and savings
If you're looking to save money on home insurance, an alarm system could mean a break on premiums, provided you keep your insurance company in the loop. While things like renovations and big ticket purchases can push premiums upwards, installing an alarm system may help offset these added costs since most companies offer discounts for secured homes. Of course what you save on your premium will end up going to the alarm company, but it's worth it for your own piece of mind.
You may be eligible for as much as a five percent discount for having an alarm system installed, even if it's just a simple alarm and not a monitored one, explains the National Post. If your alarm system does tie in to a central monitoring station, the discount could go as high as 20 percent, depending on what sort of coverage you have.
Policies vary from company to company. Some may include wiggle room for minor upgrades and renovations, while others may not. If in doubt, it’s always a good idea to check with your broker to make sure that finishing your basement or adding a fireplace isn’t going to alter your bottom line.
Things you can do to update your property insurance
- Take photos of your belongings and/or document them with an app. Good old Google Sheets is a good cloud-based option for simple spreadsheets that you can use to list things.
- Take special care to document your more expensive and irreplaceable items, like jewellery, art, fine wines, etc.
- Check into options like water / flood sensors for your alarm system - you may be eligible for additional savings on your policy and besides - they're just a great way to prevent major damage.
- Make note of any renovations you've performed and be sure to let your insurance broker know. You want to make sure that your home is insured for the proper replacement value.
- Look into new types of insurance coverage like overland water protection and ask lots of questions. Your broker can help you to decide what coverage is best for you.
Your Insurance Broker Advantage
This is one of the areas where having a broker in your corner really comes in handy. If your upgrade, renovation or other policy change will negatively impact your premiums, they can shop around for better coverage for you to match what you need when your policy renewal date comes up. It's best to contact your broker before you make any changes so they can advise you on them; it may be best to wait until your policy renewal date to perform any major renovations or additions. They'll also know exactly who to contact at your insurer and will inquire on your behalf, saving you valuable hold time you can use to live your life.
Contact First Foundation Insurance today to find out how you can get an insurance broker working for you.