Home renovations can breathe new life into your living space and boost your property value, but they can also significantly impact your homeowner’s insurance. Many homeowners overlook how their coverage needs may change after a remodel, which can leave them exposed to risks or unnecessary expenses. Here’s everything you need to know about how home renovations can affect your insurance coverage in the US.
Why Home Renovations Matter for Insurance
When you renovate your home, you are altering its structure, functionality, or value. Insurance companies base premiums on various factors, including your home’s replacement cost, safety features, and overall risk profile. A major renovation could change one or more of these factors, prompting adjustments to your policy.
Common Renovations and Their Impact on Insurance
1. Increasing Home Value
Renovations like adding a new kitchen, finishing the basement, or building an addition increase the value of your home. With a higher property value, your insurance may need to cover more, potentially raising your premium. Without updating your policy, your coverage might fall short in the event of a claim.
Key Tip: Notify your insurance provider about renovations that significantly increase your home’s value. Ask if you need to increase your dwelling coverage.
2. Enhancing Safety Features
Upgrades such as installing a new roof, adding a security system, or replacing old electrical wiring can reduce risks and potentially lower your premium. Insurance companies reward safety improvements with discounts because they minimize the likelihood of damage or theft.
Key Tip: Provide documentation of these upgrades to your insurer to qualify for discounts.
3. Adding Risky Features
Features like swimming pools, hot tubs, or trampolines may enhance your lifestyle but increase your liability risk. These additions often require higher liability limits to protect against potential accidents and lawsuits.
Key Tip: Consider umbrella insurance for broader liability coverage if you add high-risk features to your property.
4. Renovating with Costly Materials
If your renovation involves premium materials like custom cabinetry, hardwood floors, or marble countertops, your replacement costs will rise. Your policy needs to reflect these changes to ensure adequate coverage.
Key Tip: Document all upgrades with photos and receipts to make updating your policy easier.
Uninsurable Risks During Renovations
While your home is under construction, you may face unique risks that your standard homeowner’s policy doesn’t cover, such as:
- Vacant Home Risks: If you move out temporarily, your home could be considered vacant, increasing the risk of vandalism or theft.
- Contractor Damage: Damage caused by contractors might not be covered under your policy unless they have their own insurance.
Key Tip: Speak with your insurer about a builder’s risk policy or temporary coverage to fill gaps during renovations.
Steps to Update Your Insurance After Renovations
- Inform Your Insurer Early
Notify your insurance company before starting any major renovations to understand how they might impact your coverage and premiums. - Reassess Replacement Costs
After renovations, request an updated assessment of your home’s replacement cost to ensure your dwelling coverage matches the new value. - Evaluate Personal Property Coverage
If you’ve added valuable items or appliances, ensure your personal property coverage is sufficient to protect these new assets. - Consider Liability Adjustments
Review your liability coverage if you’ve added features that could pose risks, like a pool or outdoor deck.
When to Shop for a New Policy
Sometimes, renovations can make your home more expensive to insure under your current policy. In such cases, it’s worth shopping around for a new insurer who offers better rates or more tailored coverage for your upgraded home.
Final Thoughts
Renovating your home is an exciting step, but it’s crucial to keep your homeowner’s insurance in mind throughout the process. Whether you’re upgrading your kitchen, adding a pool, or making structural changes, keeping your policy up to date ensures you’re adequately protected.
