Home renovations happen for a variety of reasons – breathing life into a fixer-upper, for example, or making room for a new family member.
From style to function, making updates around your home can make it a more comfortable space for you and your family to live in. But while home renovations can improve your quality of life, they can also affect your home insurance policy.
How renovations affect your home insurance…
When you purchased your home, you also likely purchased a standard home insurance policy. That policy was created to protect your home as it was at that point in time. Updating your home could mean you may need to update your home insurance policy. Failure to do so could leave your largest investment only partly protected.
If you're undertaking a renovation, you should call your home insurance provider before the work even begins. Tell it your plans and see if you may need additional coverage to protect yourself during and after the renovation. Your provider can help you understand your coverages and show you where gaps may lie.
Now, let’s go over some of the ways your home renovations can affect your home insurance.
More to insure
If your home renovation project includes increasing the square footage of your house, then it may end up costing you more to insure it. With increased square footage you might wind up needing more dwelling coverage, which is the part of your home insurance policy that protects the physical structure of your home from certain perils, including fire, wind, hail and more.
Your dwelling coverage limit should be set at the amount of money it would require to rebuild your house should it be destroyed by a covered peril. The added square footage of your renovation means that your home will now likely cost more money to rebuild, which means you may need to up your coverage limits.
If you know the increased square footage of your home, you can use a dwelling coverage calculator to get an estimate of your home’s updated value. This calculator uses your ZIP code and works by multiplying the square footage of your home by local construction costs. This short video includes more information about your replacement cost.
Pricey upgrades
Beyond the size of your home, you may also be adding expensive new furniture or appliances to complete your renovation. These items are protected under your home insurance policy’s contents coverage; however, this coverage has limits. Expensive items may spill over those limits, meaning you would need to increase your coverage to protect your new items. Review your policy to see if your upgrades are sending you over the edge.
Not sure how much your home’s contents are worth? You should consider creating a home inventory. A home inventory lists all of your possessions along with their value. This list will help you keep track of the items in your home as well as a running total of their value. Knowing the worth of everything in your home can help you tell if you need more contents coverage. Home inventory lists can also come in handy if you ever need to file a claim or if you move.
Liability threats
Home renovation projects can turn your house into one giant liability threat. Why? Because your home is basically turning into a temporary construction site, which ups the risk of injury on your property. While standard home insurance policies usually offer some form of liability coverage, it may not be enough in the event something goes wrong. This is where your contractor comes in.
Responsible contractors carry their own general liability coverage and workers compensation coverage. Just make sure you ask your contractor to provide you with physical proof of these coverages before he or she begins work on your home. Some contractors may try to slide by without liability protection and if something happens, you could end up being held responsible.
Do your homework ahead of time
Home renovations are a big investment and undertaking. You want to make sure that you're hiring the right people for the job and that you’re property insured throughout the entire process. Take the time to read online reviews before hiring a contractor.
Sites such as Angie’s List or Redbeacon can help give insight into a contractor’s quality of work and trustworthiness. Personal recommendations from family and friends also are great. Just make sure you still ask for proof of insurance.
Aside from hiring a responsible professional to complete your project, make sure you take time to consider the insurance implications of your renovation. From protecting your new investment to protecting yourself from potential liability threats, insurance shouldn’t be an afterthought when updating your home.
Samantha Alexander writes for HomeownersInsurance.com, an online insurance resource for homeowners and drivers across the country. Offering comparative automobile and homeowners insurance quotes, consumers rely on HomeownersInsurance.com for the most competitive rates from the top-rated insurance carriers in the country. The HomeownersInsurance.com blog, Square One, provides tips and advice on a range of financial topics to help homeowners and homebuyers make educated decisions about their insurance purchases.
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