Do Home Renovations Impact Home Replacement Costs for Insurance?

Undertaking home renovations can be a stressful yet exciting task. Sure, it will be a lot of work, but the payoff will be well worth the effort. With things like budgets, paint colours, and luxury finishing’s floating through your mind the last thing you might be concerned with is insurance. You just want a fresh new kitchen or bathroom, what does insurance have to do with it? Do home renovations really impact home replacement cost insurance? The short answer: yes.

How Do Home Renovations Impact Home Replacement Cost Insurance?

Any home renovation you undertake has the potential to increase or even decrease your home replacement cost.

What Type of Renovations Are You Undertaking?

Before you can answer how home renovations impact replacement cost, you must ask yourself the what: what type of home improvement are you undertaking? Will your renovation be a simple facelift: changing paint colours, updating hardware, purchasing new furniture?  These small modifications have a significant impact on aesthetic appeal but do not impact your replacement cost insurance.

Adding & Reducing Home Value

Renovations impact your replacement cost if you are adding or subtracting value to your home.  For example, adding an addition to your home will increase its square footage; it will naturally cost more to replace a larger home; thus, an addition would increase your replacement cost for insurance. Changing square footage from non-liveable to liveable space will also increase home replacement cost. If you’re planning to turn your currently unfinished attic space into the master-suite of your dreams, it will increase your home’s replacement cost. Logically, replacing an open attic with exposed ductwork, no floor, no drywall and minimal insulation would cost a lot less than it would to replace a fully finished space with proper insulation, drywall, flooring, ventilation and plumbing.

Creating a new space will increase the replacement cost of your home. However, in some circumstances, home renovations can decrease replacement cost. If you decide you have one too many bathrooms and not enough closet space, removing the unused guest bathroom and turning it into a gorgeous walk-in closet could decrease replacement cost. Rebuilding a closet will cost a lot less than replacing a bathroom.

Things to Consider When Undertaking Home Renovations and How It Will Impact Replacement Cost

The big thing to ask yourself when undertaking a renovation is “will these changes cost more to replace than what we currently have?”  The biggest impact to your home replacement cost is additional square footage such as additions or changing non-liveable space into liveable space.

Upgrading Features

Other renovations that have a tremendous impact on home replacement cost is upgrades or additional features – adding wainscoting or crown-molding to a room that previously didn’t have it will cost more to replace, and thereby will increase your replacement cost. Adding built-in elements, a wired-in surround-sound system, a wired-in security system, or even a bidet will all cost more to replace in the event of a loss.

Upgrading Finishes

Upgrading finishes can also increase the replacement cost of your home. Upgrading Formica countertops to granite, quartz, or marble; swapping vinyl or laminate flooring for ceramic or hardwood; or changing a particle-board vanity to a hardwood vanity would all cost more to replace. If any change you make would cost more to replace than what you originally had its safe to assume it will impact your home’s replacement cost.

When Should You Notify Your Insurance Company of Home Renovations That Could Impact Replacement Cost?

Any changes you make to your home should be communicated to your insurance company to ensure your home is properly protected.

Now that you’ve mapped out your renovation and understand the scope of the project, when do you notify your insurance company? When you have the renovation mapped out, an estimated cost, and an estimated date of completion you should call your agent or broker; they will make the necessary adjustments to your replacement cost at that point to ensure coverage is in place in the event of a loss during renovations. Once renovations are complete, you should call your agent/broker again to confirm the final cost and completion of the project.

It’s important to note that the estimated cost of your renovation does not directly correlate to the changes in your replacement cost. If you undertake a $10,000 renovation, it does not necessarily mean your replacement cost will increase by $10,000.

Find Out How Renovations Will Impact Your Home Replacement Cost

If you want to determine how much your renovation will impact your home replacement cost, our Residential Cost Guide can help. Using the Douglas Residential Cost Guide before your renovation and after its completion allows you to compare your home’s replacement cost pre and post-renovation. This will showcase the impact of any changes before you call your insurance company. Douglas Residential Cost Guide can set your mind at ease so you can fully enjoy your newly renovated space.