Home renovation is a great method to enhance the functionality, property value and curb appeal of your home. But there is one of the most important factors that many homeowners should consider, that is, how home renovations influence their insurance policy.
If your home renovation involves adding a room, updating a kitchen or bathroom, or installing a swimming pool, it is important to understand how these changes would affect your insurance coverage, liability, and premiums. Here's what you need to know and understand about renovations and insurance coverage for your home.
Understanding Homeowners Insurance
Homeowners insurance covers the damages caused to their home due to unexpected events like fire, windstorm, hail, or lightning. If the property is damaged or destroyed, the dwelling coverage, which is a part of your policy, helps to pay for the repair or rebuilding of your home, covering the loss. It also covers liability insurance and worker's compensation, that is, when someone else gets injured on your property, like the contractors working on your property or your friends or family.
How Home Renovation Affects Insurance?
All renovations are not covered by the insurance. Some renovations might increase your premiums like swimming pools which might raise the risk of accidents and liabilities. Other renovations might lower them like installing electrical and plumbing systems or installation of security systems.
Kinds of Renovations and Their Impact on Insurance Coverage
The kind of renovation you make in your home impacts the rate at which the insurance needs to change. The increase in the value of the home points towards the need for more insurance coverage. This can also lead to a rise in premiums that goes hand-in-hand with it. However, insurance coverage and premiums are not always the same.
Home Additions
Adding a room on the back of your home or a dormer that will increase the space on the second floor, will increase the home's square footage and will enhance the value of the home as well. Ensure to call your insurer representatives once the architectural design is finalized and let them review the remodel insurance choices and the likely to increase premium so that you are aware of the cost after renovation.
Installing a Pool or a Hot Tub
A pool or a hot tub would add a great value to your home but they could be a liability hazard as well. When a pool or a hot tub is installed, there is a probability that someone might get hurt which will increase the premium. Hence, insurers need to save themselves from liability claims.
The insurer might also make it necessary to add a fence or night-time lighting around each water feature on the property.
Roof Replacement
It adds a great value to the home and may affect the premium but it will also be qualified for a discount as provided by many insurers. There is a probability of gaining further discounts if you live in a coastal area which is hit by hurricanes or wind storms on a regular basis.
Updating the Kitchen
Renovating your kitchen can enhance the value of the home. It would be required to update the limits in the insurance policy if you renovate the countertops or add new cabinetry, flooring etc. The result would be in your favor as you will be reimbursed in any event of disaster.
Additional Coverage to Consider for Renovation
Here is the additional coverage you can consider as per the nature of the renovations.
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Builder's risk insurance - This policy would secure the home and construction materials during the renovation procedure.
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Flood insurance - Consider adding flood insurance if you live in a flood-prone area, especially if making basement renovations.
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Vacant home insurance - You might be living somewhere else while your house is under construction due to the renovations you need. However, consider buying vacant home insurance coverage if you plan to stay outside for more than 60 days. It will provide protection against any damage that occurs in your absence.
Final Words
Irrespective of the type of renovations made by the homeowners, there is a chance that existing coverage limits might be too low to cover you during or after the work. Therefore, make sure to contact the insurance agent before the beginning of the construction and verify through them whether the existing policies would be enough to cover all the work you plan to do. If they cannot, then update the policies before the commencement of any work. And, if you have to add something more to the existing plan, keep in mind to have the agent updated.
