Do Home Renovations Impact Home Replacement Costs for Insurance?

Home renovations can be stressful and exciting. While it requires a lot of work, the payoff is worth it. Amidst the budgeting and design decisions, you might not think about insurance. But, the truth is, home renovations can impact home replacement cost insurance. In this blog, we’ll explore how home renovations impact replacement cost and how the Residential Douglas Cost Guide can help. 

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. Before you start on your home renovation project, it’s important to consider the type of renovations you are undertaking and how that may add or reduce your home’s value.

If your renovation is just a simple facelift, i.e. changing paint colours, updating hardware, or purchasing new furniture, these small modifications may impact your home’s aesthetic appeal but they will not impact your replacement cost insurance.

Types of Renovations that Will Impact Your Home Replacement Cost Insurance

Renovations impact your replacement cost if you are adding or subtracting value to your home.  For example, adding an addition to your home increases its square footage. As a result, it will cost more to replace a larger home. Therefore, 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. This is because 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 your home’s replacement cost. Rebuilding a closet is likely to 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?” Some things to consider include:

Upgrading Features

Apart from renovations that impact square footage, other types of renovations that may have an impact on your home’s replacement cost are upgrades or additional features. For example, 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. Moreover, adding built-in elements such as 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. For example, 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, it’s 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. When you have the renovation mapped out, an estimated cost, and an estimated date of completion you should call your agent or broker so that they can make the necessary adjustments to your replacement cost at that point to ensure coverage is in place in the event of a loss. 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 insurance, 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 uncover the potential impact of any changes before you call your insurance company.