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Material Change—Can Affect Your Insurance

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In the insurance world, material change is described as “any change material to the risk and within the control and knowledge of the Insured” or “a substantial and continuing change in your situation that affects and increases the risk involved to insure your property”. Material change of any kind could affect your insurance.

An insurance policy is a legal contract between you and your insurance company that is based on the information that you originally provide. The insurance company calculates the risk of loss, decides whether or not to insure you, and then, if they do insure you, rates your premium on that risk. Once you accept that premium and sign the insurance documents, the contract has been established. Thereafter, any material change to information you originally provided must be reported to the insurance company because the risk in the insurance contract may have been affected. Failure to report a material change might have serious implications to your insurance coverage, such as restricting or reducing your coverage or even voiding coverage altogether.

Material Change—Home Insurance Examples

Not all material change increases insurable risk. For example:

  • Setting up a permanent home daycare operation is a material change that increases insurable risk, but babysitting a neighbour’s child for a week is not
  • Setting up a woodworking or welding business in your garage is a material change that increases insurable risk, but working a few days at home at your computer is not
  • Adding an additional wing to your home is a material change that increases insurable risk, but replacing your wall-to-wall carpet, sink, or toilet is not
  • Renting a room or your basement area to a tenant is material change that increases insurable risk, but having guests stay with you for a short period of time is not

Before you make any changes to your home or vehicle, contact your Murrick Group insurance agent so that we can forward any material change to your insurance company.

Material Change in Commercial Insurance

Just as material change can affect your home and vehicle insurance, so too can such changes affect your commercial insurance. Be proactive and contact your Murrick Group insurance agent whenever you are planning changes or changes occur in your business so that we can make sure you have the appropriate insurance coverage. In the past, commercial policies may have been renewed as is, assuming there were no changes to the coverage limits and no changes to your business operations. That has now changed. Insurance companies are tightening their eligibility and coverage guidelines and requiring in-depth information and updates on renewal.

Please tell your Murrick Group insurance agent of any changes that might affect your coverage. For example, if you are:

  • planning to sell online or ship worldwide
  • expanding your interior decorating operations to include project management
  • expanding your hair salon business to include online classes
  • changing your business space to include a neighbouring unit or subleasing all or part of your space to others
  • adding subcontract jobs such as packaging for others

If your revenue or payroll is changing, please let us know, because business interruption limits and liability premiums might be affected. For example, if your gross revenue increases by four percent per year for five years, your revenues might increase 20 percent during those five years. If your liability coverage is based on your revenue, and you don’t report the annual increase, if you experience an insured loss, your coverage is going to be based on your revenue last reported to your insurance company. Also, since your liability premium is based on your revenue, at some point, when your liability rates are properly applied, you may be shocked.

To ensure you have appropriate commercial insurance, please call your Murrick Group insurance agent to discuss any planned, upcoming, or unplanned changes to your business.


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