You’ve hired the contractor. You’ve picked out the tiles. Your kitchen reno starts in two weeks — and you haven’t called your insurance company yet.
That’s a problem.
According to insurance industry data, only 6% of Canadian homeowners check their home insurance renovation policy before starting a project. If something goes wrong mid-project — theft, fire, injury — your claim could get denied because you didn’t update your coverage.
What Is Home Insurance Renovation Coverage and Why Does It Matter?
Home insurance renovation coverage protects your property and finances during construction work, including damage to unfinished areas, theft of materials, and liability for contractor injuries. Standard policies assume your home remains as it was when you bought it — any structural changes or extended vacancy can void coverage if not disclosed to your insurer.
According to the Government of Canada, failure to notify your insurer about renovations is one of the top reasons claims get denied. That means you’re covering the damage yourself. No payout.
Even small upgrades — like replacing old windows or adding a bathroom — can void coverage if they’re not disclosed. It’s not about project size. It’s about the change to your contract.
How Do You Know What Type of Coverage Your Renovation Requires?
The coverage you need depends on the scope of work. A bathroom refresh is different from gutting the second floor. Before you start, call your insurer and walk through the plans. They’ll tell you what applies to your situation.
Here’s what might come up:
When Do You Need Vacant Home Insurance?
Moving out during the reno — even for a month — means most standard policies won’t cover you. Vacant home insurance fills that gap. Some insurers require a vacancy permit if you’re gone for 30 days or more, which can add $30-$50 monthly to your premium.
Not all companies offer it. Shop around before the work starts if yours doesn’t.
What Does Builder’s Risk Insurance Actually Cover?
This is short-term coverage designed for major renovations. It protects your dwelling while it’s under construction — from fire, wind, lightning, theft of materials, or damage to unfinished work. Builder’s risk insurance is separate from your regular policy and typically expires when the project wraps up.
Adding square footage or knocking down walls? Ask your insurer if you need it.
Builder’s risk usually costs 1-5% of your total renovation budget. For a $50,000 kitchen, expect to pay $500-$2,500 for coverage. The exact cost depends on your location, project duration, and the value of materials on-site.
Why Liability Coverage Can Save You From Lawsuits
Contractors, electricians, plumbers — they’re all on your property. If someone gets hurt, you could be held responsible. Liability coverage protects you from medical costs, legal fees, and settlements if there’s an injury during the renovation.
Your standard policy includes liability coverage, but it might not be enough for a major project. Ask if your current limit — often $1 million — should be increased while contractors are working.
Don’t assume your contractor’s insurance covers everything. Get proof of their workers’ compensation and liability coverage in writing before they start.
Can Renovations Lower Your Insurance Premium or Increase It?
Renovations can either raise or lower your premium depending on what you’re changing. Upgrades that reduce risk — like a new roof, updated electrical, or a backup sump pump — can save you money. Insurers reward homes that are less likely to file claims.
On the flip side, increasing your home’s value or square footage raises the replacement cost, which is the amount it would take to rebuild your dwelling from scratch. More square footage means a higher rebuild cost, which means a higher premium.
Real talk: if you finish your basement or add a second story, your premium will probably go up. That’s not a bad thing — it just means your coverage matches your home’s current value. Better that than being underinsured after a fire.
How to Update Your Coverage Before, During, and After Your Renovation
Staying protected through a renovation isn’t complicated, but it does require a few intentional steps. Here’s the order you should follow:
- Contact your insurer before you start. Share your renovation plans, timeline, and contractor details. Ask what coverage changes are needed and whether builder’s risk or a vacancy permit applies.
- Get proof of contractor insurance. Request copies of their workers’ compensation and liability certificates. Keep them on file in case something goes wrong.
- Document everything. Take photos before, during, and after the work. Keep receipts for materials and labor. This helps if you need to file a claim or prove the home’s updated value.
- Notify your insurer when the work is done. Report the completed renovations and ask if your premium or coverage limits should change. If you plan to rent out a newly finished basement or use the space for short-term rentals, disclose that too.
- Review your policy annually. Renovations change your home’s value over time. Check in with your insurer each year to make sure your coverage still matches your property’s worth.
What Happens If You Don’t Tell Your Insurer About a Renovation?
If you file a claim mid-project without updating your policy, your insurer can deny it. They’ll say you breached your contract by not disclosing material changes to the property. You’re stuck paying for the damage yourself — potentially tens of thousands of dollars.
Even worse: if the renovation increases your home’s value and you don’t update your coverage, you could be underinsured. Let’s say your home was worth $400,000 when you bought it, but after adding a second bathroom and finishing the basement, it’s now worth $500,000. If a fire destroys your home and your policy still reflects the old value, you won’t get enough to rebuild.
The Canada Mortgage and Housing Corporation (CMHC) recommends reviewing your insurance annually, especially after major home improvements. It’s one of those boring tasks that can save you a ton of money.
Do You Need to Update Your Coverage for Minor Renovations?
It depends. Cosmetic changes — like painting walls, replacing flooring, or swapping out light fixtures — usually don’t require a policy update. Structural changes — like removing walls, adding plumbing, or upgrading electrical systems — almost always do.
When in doubt, call your insurer. A five-minute conversation now beats a denied claim later.
Bottom line: if your renovation changes the size, structure, or use of your home, tell your insurer. If it’s just a fresh coat of paint, you’re probably fine.
Frequently Asked Questions
Does standard coverage protect you if a contractor damages your property?
Not usually. Your policy covers damage from events like fire or wind, but damage caused by a contractor’s mistake falls under their liability coverage. That’s why you need proof of their insurance before they start. If they don’t have coverage and something goes wrong, you’re left holding the bill.
How much does builder’s risk insurance cost in Canada?
Builder’s risk insurance usually costs 1-5% of the total renovation budget. For a $50,000 kitchen reno, expect to pay $500-$2,500 for coverage. The exact cost depends on the project scope, location, and duration. Most policies run for 3-12 months.
What happens if your contractor doesn’t have workers’ compensation?
If your contractor isn’t insured and there’s an injury on your property, you could be held liable for medical costs, legal fees, and settlements. Always ask for proof of workers’ compensation and liability coverage before hiring anyone. Don’t assume they’re covered just because they’re licensed.
Can a renovation lower your premium?
Yes. Upgrades that reduce risk — like a new roof, updated electrical, or a backup sump pump — can lower your premium. Insurers reward homes that are less likely to file claims. Ask your provider if your upgrades qualify for a discount after the work is done.
Do you need to tell your insurer if you finish your basement?
Yes. A completed basement increases your dwelling’s value and square footage, which affects your replacement cost. If you plan to rent it out, you’ll also need to update your occupancy status and possibly add rental or short-term rental coverage. Skipping this step can leave you underinsured.
Thinking about refinancing to fund your renovation? Arch Canada can match you with a broker who understands how renovations impact your mortgage and insurance. They’ll walk you through your options and help you find the right fit.
