Skip to main content
The Globe and Mail
Support Quality Journalism.
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
Just$1.99
per week
for first 24 weeks

Enjoy unlimited digital access
Enjoy Unlimited Digital Access
Get full access to globeandmail.com
Just $1.99 per week for the first 24 weeks
Just $1.99 per week for the first 24 weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(select.open)}function setPanelState(o){dom.root.classList[o?"add":"remove"](select.open),dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); } //

The new federal home renovation tax credit has highlighted what the insurance industry considers to be a chronic problem of homeowners not having enough coverage.

The temporary new tax measure, announced in the January budget, provides a credit of up to $1,350 for renovations or fix-up jobs costing between $1,000 and $10,000. A general rule if you're undertaking a reno that adds substantial value to your home: Call your insurer.

It's quite possible your chat will result in you paying a little more in home insurance premiums, which I can tell you from personal experience have risen sharply in recent years. But from the point of view of minimizing hassles if you ever have to make a claim, the extra cost will be worth it.

Story continues below advertisement

"Your home is the largest single investment you'll make, and it's worth it to protect it," said Anne Marie Thomas, an account manager with InsuranceHotline.com and a former underwriter and broker.

The home reno tax credit was announced as part of a package of measures to stimulate the economy, and it seems to be working. ResMor Trust Co., a small player specializing in mortgages, commissioned an online survey of 1,000 Canadians recently and found that 70 per cent planned to renovate their home before the Feb. 1 deadline for using the home reno tax credit. Almost 40 per cent said the decision to renovate or the amount to be spent was influenced by the tax credit.

But even if you're not renovating, it still might be worth a call to your home insurer. When you set up a home insurance policy, you have to answer a number of questions designed to help the insurer decide how much the replacement value of your home would be. Note: This pertains to the cost of rebuilding, refurnishing and restocking your house, not its value in the real estate marketplace.

Let's say the replacement value of your home is set at $200,000, and then you spend $25,000 to finish your basement. If you don't notify your insurer and your house burns down, your coverage could fall short of what's ultimately required, leaving you out of pocket for some of the replacement costs.

"There's a lot of talk in the industry about people being under-insured," said Chris Cooney, vice-president of pricing for the home and auto division of RBC Insurance. "That's the situation where someone needs $400,000 of coverage and only has $200,000 or $300,000 of coverage."

Leonard Sharman, a media spokesman at Co-operators Group in Guelph, Ont., cited a recent article in Canadian Underwriter magazine that said 80 per cent of residential homes in Canada are undervalued by 27 per cent.

"Homeowners must inform their insurance company of any changes to the home that would increase its value significantly," Mr. Sharman wrote in an e-mail. "This is a requirement in the insurance contract. If such an improvement is not reported to the insurer, it could lead to the client being - in insurance-speak - under-insured."

Story continues below advertisement

Ms. Thomas, of the online insurance quote service InsuranceHotline.com, said it's worth calling your insurer if your renovation value is going to be more than $5,000. She offered a very rough estimate that a $50,000 reno might cost you an extra $50 a year in premiums.

RBC's guidance is that work such as reshingling a roof qualifies as maintenance and thus shouldn't affect the replacement value of your home. Remodelling of kitchens or bathrooms and installing hardwood floors would similarly be considered maintenance rather than improvements.

Premium upgrades, however, may require that you call your insurer. Ms. Thomas said an example would be an expensive granite kitchen countertop, which could cost something close to $10,000.

RBC's examples of jobs that would qualify as improvements include putting an addition on or building a home theatre in the basement. If you're filling your home theatre with expensive electronics, make sure you have sufficient insurance coverage for your home's contents (as distinct from the structure).

If your house is going to be vacant for more than 30 days during a renovation, then you've got another reason to call your insurer. Unless you get what's called a vacancy permit, you may find your coverage applies only minimally or not at all while you're away.

Ms. Thomas said it's important to consider your contractor's insurance as well as your own when undertaking a renovation. Ask to see the contractor's comprehensive general liability policy, which should protect against damage to your home or a neighbour's.

Story continues below advertisement

Your contractor's coverage is especially important because some home insurance policies won't cover damage caused by renovation, construction or repair. RBC suggests contractors should have a minimum of $1-million in coverage.

***

The renovation rules

Some facts and figures on the new federal home renovation tax credit

Timeline:

Goods purchased or work performed after Jan. 27, 2009, and before Feb. 10, 2010

Limits:

The 15-per-cent credit applies to spending of more than $1,000 and up to

$10,000, with maximum credit of $1,350

Applies to:

Home or cottage

Eligible Work:

Examples include kitchen or bathroom renos, new floors, reshingling a roof,

laying new sod, interior or exterior painting, new furnace or fireplace

Ineligible:

Furniture, electronics, maintenance contracts, cleaning

Tax filing:

You must file detailed receipts, invoices or agreements to claim the credit

for the 2009 tax year

More Info:

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow the author of this article:

View more suggestions in Following Read more about following topics and authors
Report an error Editorial code of conduct
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies