Renovation Insurance in Ontario: Additions, Second Storeys, Basements and Living Through the Work

Call the Insurer Before the First Swing, Not After the First Leak

A standard home policy excludes or limits a house under construction, and insurers say you must tell them before major work or the coverage can be voided. The mechanism is simple: the premium was set on a closed, heated, occupied house with working plumbing, and a renovation changes every one of those for a while.

What counts as “major” is where people get caught. One Canadian insurer’s guide drops vandalism, glass and water damage even during minor work, and will not keep a home policy going at all if you move out or the structure changes. An Ontario Court of Appeal decision cut the other way on one point: a renovation is not automatically “under construction” for a home policy exclusion. Do not leave that to a judge. Get the insurer’s position on your job in writing before anything is torn out.

Published ranges from one source type each, not quotes; Ontario retail sales tax of 8% applies to most property premiums on top.

Living in the House While the Work Goes On

If you are sleeping there, cooking there and getting the mail, most insurers will keep the home policy going through a renovation they have been told about. The catch is what can stop being covered while the work runs: on at least one Canadian insurer’s form, water damage, vandalism and glass. Know where the shut-off is, and hire a contractor who caps lines before he leaves.

The 30-day clause bites hardest. Most policies treat a house as vacant once nobody has lived in it for 30 consecutive days. In an Alberta case the owner lived in a trailer on the lawn during the renovation, the house burned, and the court agreed with the insurer that he had not been living in the dwelling. A trailer on the lawn is camping.

1. Tell the insurer before the work starts and ask, in writing, whether you are still “living there” if you sleep at your sister’s for three weeks while the floors cure.
2. Count the days. If you will be out 30 or more, buy the vacancy permit before day one, not after day 31.

Additions and Second Storeys: Where the Home Policy Runs Out of Road

The moment the structure changes, you are building, not decorating. Some insurers will endorse the home policy to add the value of the new work as it goes in. Others will not keep a home policy on a house with the roof off and will send you to a stand-alone builder’s risk policy on the addition. Either works; two policies that do not know about each other does not.

A stand-alone policy on an addition is priced like any course-of-construction policy: a percent of the hard cost of the new work, land and the existing house excluded. On a $250,000 addition, our planning numbers of 0.5%, 0.9% and 1.5% give $1,250, $2,250 and $3,750 for a 9 to 12 month term. The top of the published range, 4%, would be $10,000; that is a published ceiling, not our estimate.

A second storey is the worst case for weather: the roof comes off, and one thunderstorm soaks two floors of finished house that were never part of the job. Bind before the demolition crew arrives. We have watched weather get into framing that was supposed to be closed in “by Friday”. Friday is a hope, not a plan.

Terms run 3, 6, 9 or 12 months, and usually one extension is granted at additional premium, so put the expiry on the fridge. If the contractor carries the policy on your addition, the who-pays page covers what the contract must say. The builder’s risk versus home insurance page covers the hand-back at the end.

Demolition, Detached Garages and Heated Workshops

Partial demolition is the riskiest week of a renovation. Water lines get cut, gas lines get found, the house is open, and the demolition crew’s own liability policy should answer for damage they cause. Tell your insurer the dates.

A detached garage, shop or studio is a separate building. Anything over 10 square metres needs a permit, and permits are the owner’s responsibility; the permit page sorts out which jobs need one. The detached-structures limit on a home policy is usually 10% to 25% of the dwelling limit. At 10% of a $600,000 dwelling limit, that is $60,000, which does not rebuild a $120,000 heated workshop. Insure the shop as a building under construction while it goes up, then raise the limit, and get the wood stove WETT-inspected.

Basement Apartments and Garden Suites Change the Policy Twice

Finishing a basement adds rebuild value, so the dwelling limit and the premium go up. Renting the unit is the bigger change: renting out part of your home without telling the insurer can void the coverage. The legal basement apartment page covers the Building Code side; the insurer wants to know the day you decide, not the day a tenant’s kettle sets off the sprinkler you do not have.

A garden suite is a separate structure, and that is how the insurer sees it. That detached-structures limit rarely covers a suite that costs $200,000 to $300,000 to build; one Canadian site puts the finished suite at about $75 or more a month extra. While it goes up it needs its own course-of-construction cover.

The Contractor’s Liability, and Yours

A renovation contractor should carry general liability insurance; at least $2,000,000 is the common recommendation for residential work. Ask for a certificate dated past the end of your job. The certificate is the receipt; the policy is the groceries.

WSIB works differently on a renovation than on a new build. A contractor hired and paid directly by the resident of a home for repairs or renovations needs no clearance certificate, and an independent operator doing only that work may be exempt from coverage; anyone with employees must still register. Confirm the exemption with WSIB, not the contractor. If you hire trades yourself, you may be the “constructor” under the Occupational Health and Safety Act, and the Occupiers’ Liability Act puts a duty of care on whoever controls the site. A worker hurt in your house with no WSIB coverage and no liability policy behind him can sue you, the homeowner.

We build houses and carry builder’s risk, liability and WSIB on every one of them; we do not sell insurance and take no referral fees. The binding answer on any policy comes from a RIBO-licensed broker. The construction insurance hub explains the three policies and who carries each; the renovations section covers the building side.

This page is general information from a builder, not insurance, legal or tax advice. Policies differ, and the wording in yours wins. Confirm your situation with a RIBO-licensed broker and, if there is a mortgage on the house, your lender.

Questions people ask

Sources and further reading

• Insurance Bureau of Canada: types of home coverage: comprehensive versus named perils, standard exclusions, occupancy conditions and replacement cost.
• Ontario Court of Appeal on renovations and “under construction”: a trade-press report of the decision that a renovation is not automatically construction for a home policy exclusion.
• Your rights when starting home renovations or repairs (Ontario): written contracts, the 10 percent estimate cap, deposits, permits, the cooling-off period, and WSIB coverage for construction workers.