Planning major home renovations or remodeling may leave you and your family vulnerable to a number of risks. With this in mind, you should do everything you can to minimize your exposure and ensure the process goes smoothly. Be sure you consider all the potential pitfalls before you begin.
"One of our clients called us after they had torn down their house to request builder's risk coverage on the property," says Kathy Rumble at HUB International Ontario Limited. Instead, the personal lines insurer cancelled the client's policy for material change in risk, and, as required by law, sent the notice to the bank. The bank then began foreclosure proceedings.
It is crucial to check with your insurer and bank before beginning major home renovations.
If you are planning to hire a contractor to perform work on your home, selecting a reputable professional is key. When it comes to something as personally and financially important as a house, construction matters should never be left in the hands of an inexperienced or unprofessional contractor.
Carefully vet contractors before hiring by asking for references from past customers. It's also worth checking the contractor out with the Better Business Bureau, as this can reveal any past problems or complaints. While it's tempting to go for the lowest quote, quality, which should be the focus in renovations, rarely comes cheap.
Get it in Writing
It is essential to have a detailed contract in place before work starts on your property.
According to the National Association of the Remodeling Industry, a well-written contract can prevent costly mistakes or additions to the scope of your project and is a critical step in maintaining your budget.
However, even more important than managing your budget are the other protections a contract provides homeowners.
"Today's homeowners expect professional renovators to 'put it in writing,' reads an excerpt from the second edition of the Canadian Home Builders' Association's A Guide to Residential Renovation Contracts. "They know that a written contract protects them and their investment in their home, and is a strong indication that their renovator is legitimate and does business the right way. A good, solid contract is also the foundation for a positive renovation experience for both you and your clients."
Among other things, your contract should include:
- What kind of work a contractor will and will not be doing
- A detailed list of materials for the project
- Approximate start and completion dates
- Detailed financial terms, such as price, payment schedule and cancellation penalty
- A binding arbitration clause in case a disagreement arises
Obtain the Proper Coverage
The right insurance coverage can be your best and last defense when it comes to home remodeling.
Your first step should be to contact your insurance broker to find out if you have the proper coverage. Next, make sure the people working on your property have the right insurance coverage. Ask both the general contractor and any subcontractors to provide you with certificates of insurance to ensure they have general liability, property damage and workers' compensation coverage in place.
Be upfront with your insurance broker. Renovations and remodeling can cause your property to increase in value or create new liability risks. Your broker will review the valuation clause on your policy to determine if your property limit needs to be changed in order to avoid coverage gaps. With all the information, you can then decide how to handle your changed insurance requirements.
With preparation and planning, you can avoid the risks and problems that can occur as part of a home renovation project. Doing this work in advance is the best way to ensure that your makeover goes smoothly and that you enjoy the home improvements you've made.