Insurance companies need to know what, exactly, they are insuring. If something happens that would impact how the insurer assesses your property, they might consider that a “material change in risk”.

Unfortunately, “material change in risk” is a common but poorly understood reason that insurance claims get denied. In this blog post, we will try to take some of the mystery out of this phrase.

What is a Material Change in Risk?

A material change in risk is any event or circumstance that would cause your insurance company to:

• Major renovations or Construction Projects
• Adding a pool or hot tub
• Renting your home, or a part of your home, to tenants or as a short-term vacation rental
• Increasing the number of tenants in a rental suite
• Changing the home from a primary residence to a secondary residence, and vice versa
• Vacancy or long absences from the home
• Starting a home-based business or farm
• Changes or upgrades to your electrical, plumbing, or HVAC systems

By law, you are required to tell your insurance company about any material change in risk.

What if I Don’t Disclose a Material Change in Risk?

The consequences of not disclosing a material change in risk can be severe. Your insurance company can deny your claim entirely, even if your claim has absolutely nothing to do with the material change in risk.

For example, let’s say you install a hot tub in your backyard and don’t tell your insurance company about it, and the next day, a tree falls on your house and damages the roof. If you make a claim for the roof damage, your insurance company can deny your claim for not disclosing the hot tub, even though the hot tub had nothing to do with the damage to your roof. The insurance company will say that adding the hot tub was a material change in risk, and your policy was void the moment you installed it without telling them. Since your policy was void when you installed the hot tub, you had no insurance when the tree fell on your house the next day. Your claim will be denied.

To make matters worse, the insurance company gets to decide whether something is a “material change in risk”. Getting the court to overturn a denial based on a material change in risk is difficult. You are much better off disclosing any changes to your property or how it is used before something happens, even if it might cause your premiums to increase.

What Should I do if I think there has been a Material Change in Risk to my Property?

Tell your insurance broker or insurance company immediately. Do it in writing so there can be no dispute about whether you disclosed the material change in risk. If the insurance company knows about the change to your property and makes no changes to your insurance, they can’t come back later and say the change was “material”.

If you are planning to make major changes to your home or your lifestyle, it is always best to speak to your insurance broker or insurance company before those changes happen. If the changes have already happened, tell your insurance broker or insurance company now. The last thing you want is your insurance company finding out about a material change in risk after you submit a claim.

If you aren’t sure whether something is a material change in risk, tell your broker or insurance company anyway. You will never be criticized for being too transparent.

Conclusion

Your home insurance is there to protect you when unexpected events occur, but only if you provide the insurance company with the information they need to assess your property. Understanding your duty to disclose material changes in risk—and following through on that responsibility—can ensure you avoid complications and maintain proper coverage.

If your claim has been denied or you’ve experienced issues related to non-disclosure, it’s important to seek legal advice to understand your rights and options. A lawyer specializing in insurance law can help you navigate the complexities of insurance contracts and fight for the compensation you deserve.