How Getting Renovations Can Impact Your Home Insurance
Home renovations can freshen up an otherwise drab dwelling and increase the value of your house. Unfortunately, you might also run into unexpected expenses such as needing more insurance to cover a higher replacement value and added protections while people work on the space.
Some improvements naturally increase expenses, such as adding a pool or other luxury items. If your home still falls under prime mortgage insurance (PMI), an increase in property taxes that are umbrellaed into payments may result in higher overall costs as well.
Experts predict homeowners will spend around $621 billion in total home improvements in 2025. They may not realize the added costs of insurance, though. Going in with your eyes open prepares you for added expenses and allows you to plan. Here are the things you should consider before undertaking a new project.
1. New and Upgraded Materials
Whether you want to upgrade your countertops from Formica to granite or you’re getting a building up to code, replacing dated materials with higher end ones can up the replacement costs and thus the amount of insurance coverage you need.
Review your policy with your insurance agent to ensure you have adequate coverage should the worst happen. Those living in Florida and leasing may be subject to Senate Bill 4-D and need to add hurricane impact windows and doors. Associations must now keep records of structural conditions and maintenance work to share with unit owners and buyers.
However, insurance companies are also offering a discount on premiums of as much as 45% with proper maintenance and materials. Each location can be unique so seeking someone with knowledge of the area makes the most sense. Getting an independent adjuster should you have a claim can also increase the amount received in case of a claim.
2. Higher Home Value
If you build an addition and increase your home’s square footage, you’ll need added coverage should anything happen. The old insurance plan likely isn’t for enough funds to replace your new structure should you lose everything in a fire or natural disaster.
Also consider any additional personal items added space brings. One example is building an in-law suite to accommodate your aging parents. You’ll need added coverage to accommodate their belongings as well as enough to replace the building should it be irreparably damaged.
Take inventory and photos of everything, including the renovated areas and keep them on file in another location in case of emergency.
3. Safety Features and Bonus Items
Adding some safety features can reduce your insurance premiums. For example, if you live in a high crime area, adding bars to the windows or an in-home security system might net you a discount.
Working smoke alarms can bring an additional discount. Some insurance companies offer discounts for adding a new roof or sprinklers or upgrading wiring and plumbing.
Interior sprinkler systems can reduce damage caused by a fire and may bring perks such as lower premiums. Talk to your agent about other discounts, such as multiple policy perks when you have your automobiles and homeowners with the same company.
4. Construction Coverage
Good idea to add additional coverage for the liability of having workers with heavy equipment or climbing on ladders and such. Even the added number of deliveries could result in an injury and claim against your property.
DIYers may want to take out some builders’ risk insurance should something happen while a new room or section of your home is under construction. Potential damage could come from vandals, natural disasters or thieves.
Talk to your contractor about the coverage they have on their crew and equipment. Some states require they take out certain policies before working a job site.
5. Home Office Coverage
If you’re building a home office, you might find you need additional coverage. Depending upon the type of business you’re running, you may have to cover expensive equipment or take out added insurance to cover clients coming and going from your space.
Talk to your insurance provider about whether you can tag on an umbrella policy with extended coverage or if you need a separate business policy. Some companies offer in-home business insurance, which may be less than other policies.
6. Flood Insurance
If you don’t currently have flood insurance, you may not realize how pricey it can be. However, if you add a basement or otherwise change the landscape or structure of your home, you could create a scenario where you now need flood insurance.
The Insurance Information Institute reports that flood damage is excluded under standard policies. Homeowners can secure a separate policy through the National Flood Insurance Program via FEMA or private companies. Only 78% of people at risk of a flood secured some form of insurance in 2023. Flood insurance can add considerably to the overall cost of coverage.
Talk to your insurance agent before beginning basement construction to find out the requirements for your area. Where is the water table and can you build on with a basement or will you now be required to add expensive coverage to your policy you didn’t need before?
7. Check Contractor’s Insurance
Don’t just talk to your contractor about their insurance. Get written confirmation they are bonded and insured. The last thing you want is for someone on their crew to get harmed and you be responsible for all their medical expenses.
Another nightmare scenario involves a contractor who doesn’t know what they’re doing, damages your existing house and leaves the structure half-finished. Insurance is meant to protect homeowners from unscrupulous builders.
8. Transportation Concerns
If you’re transporting any of the building materials yourself, ensure your automobile insurance will cover any problems. Things such as bundles of wood or heavy tiles may come loose and create damage while driving down the road.
Typically, your auto insurance would cover you for any liability but it’s always best to double-check and make sure you have adequate amounts should the unthinkable happen.
9. Lapse in Coverage
You should always inform your insurance company of any upcoming renovations. Many policies have fine print that states you must tell them within so many days before starting construction to be covered. While the policy typically will cover damages during construction, such as a building collapsing, it’s best to cover your bases and make sure your agent is aware of your building plans and that you take out any additional recommended extensions to your policy.
Keep in mind if you must vacate your home during some of the renovations, your standard policy also won’t cover you for theft and vandalism as the property will be considered vacant. Talk to your agent about any needed coverage to protect your assets from bad players while you aren’t there.
Review Policy and Upgrade After Finishing Renovations
You should work with your provider and review your policies at several points during the renovation process. Talk to your agent before starting remodeling, during and after completion to ensure you have the insurance you need at a rate you can afford.
Once you’ve finished your upgrades, get an independent evaluation of replacement costs and ensure you have adequate coverage for your home’s current, updated value rather than what it was worth before the renovations began.
