According to :

Building without a permit is not a criminal offense unless you are
selling the service to a 3d party. I have never seen a policy that
would keep you from collecting unless they could prove you
intentionally committed arson.

Caution. Most house insurance policies carry exclusions for the
consequences of illegal acts. In Canada, violating the electrical
code (for example) is an illegal act (provincial level). I assume
that it is in some US jurisdictions as well (even if only a bylaw
infraction).

In Canada, legal prosecutions for code infractions are _extremely_
rare, and usually only when the consequences were especially
severe[+]. Still, insurance companies like avoiding payouts. If
a fire is a consequence of unpermitted wiring modifications, you
can damn betcha they have incentive to refuse to pay.

Will they? Depends. Do you feel lucky?

If they do, you have to sue. Which, on top of the consequences
of a fire is going to be extremely costly. No insurance payout,
an unuseable house, and trying to pay a lawyer at the same time.

Not fun.

Do I pull a permit for minor work? No. Because I know _my_
work won't cause problems, and the overall risk is extremely low.
But certain things I do pull permits for - not because I can't
DIY them (some I do), but because they're more major/critical,
and the consequence of foulups is so high.

Furthermore, I make sure that permits are pulled for work that
contractors do for me. The permits protect _me_ from shoddy
workmanship, which is altogether too common - and a lot more
obvious now that I've been watching Holmes on Homes ;-)

[+] Just recently, a local landlord (man and wife) were fined $12K
for not providing smoke alarms. While there is a bit more
legislation regarding fire alarms than "merely" the Ontario
Building Code, the fact that five people died as a result of
the fire demonstrates that the govt. is fully capable of
enforcing the code thru the courts where "making an example"
is necessary. The papers didn't say whether the insurance companies
paid for the damage. I somehow doubt it.
--
Chris Lewis, Una confibula non set est
It's not just anyone who gets a Starship Cruiser class named after them.