If you are thinking of remodeling your kitchen or adding a pool, you may be wondering just how these renovations will affect your homeowner’s insurance policy. Home renovations are exciting and can significantly increase the value, comfort, and functionality of your home. But there’s one important factor many homeowners overlook during the renovation process: how these changes affect your homeowners insurance policy.
While your focus might be on materials and design, it’s just as important to consider how upgrades impact your insurance premiums and risk exposure. Here’s what you need to know before – and after – you renovate.
Renovations That Can Increase Your Home’s Value
Any time you improve or expand your home, you’re likely increasing its replacement value (the cost to rebuild it in case of a total loss.) Common value-boosting renovations include kitchen or bathroom remodels, room additions, converting a garage into living space, installing a pool or spa, building a deck or patio, upgrading flooring, roofing, or windows, and adding high-end appliances.
You may now be underinsured because your existing policy was based on your home’s value prior to the renovation. If a fire or other disaster strikes, your current policy limits might not be enough to fully cover repairs or rebuild costs.
What to do: Always notify your insurance provider before starting major renovations. They may recommend adjusting your coverage limits to reflect your home’s new value.
How Renovations Can Affect Your Premiums
Some renovations may lead to higher premiums, while others can actually lower your insurance costs. For instance, swimming pools or hot tubs add value and increase liability risk, especially if someone is injured on your property. Also, additions add more square footage, which means more to insure. Regarding luxury upgrades, installing high-end fixtures or materials increases replacement costs.
Conversely, a new roof – especially with impact-resistant materials – can reduce storm damage risk and lead to lower premiums.
Upgraded plumbing or electrical systems also reduce the chance of fire or water damage and may translate to savings.
Similarly, adding a monitored alarm system, smart locks, or cameras may qualify you for discounts.
What to do: Ask your insurer about potential discounts when completing safety or structural improvements. Keep records and receipts of all upgrades for your insurance file.
Are Contractors and Materials Covered During Construction?
Many homeowners assume their existing policy will cover everything during the renovation process, but that’s not always the case. If a contractor accidentally damages your home—or a fire breaks out mid-construction—you may not be covered unless you’ve taken extra precautions.
Key Steps to Take
- Verify contractor insurance: Make sure your contractor has general liability and workers’ compensation coverage.
- Consider builder’s risk insurance: This temporary policy can protect materials, equipment, and the structure during renovations.
- Update your coverage mid-project if the value significantly increases during the build.
After the Dust Settles: Review Your Policy
Once renovations are complete, contact your insurance agent or provider to review and update your policy. You may need increased dwelling coverage to reflect the new replacement cost, updated personal property coverage if you’ve added valuable appliances or furniture, or higher liability coverage if you’ve added risk-prone features like a pool or trampoline.
Also, update your home inventory to include any new purchases or fixtures. This helps streamline the claims process in case of future loss.
Anderson & Associates Can Help
Renovating your home is a major investment—and protecting that investment is just as important as picking the right paint color. Before breaking ground, talk to your insurance provider about how your project could affect your coverage and premiums. By staying ahead of these changes, you can enjoy your upgraded space with the peace of mind that you’re properly protected.
Anderson & Associates Insurance Group is here to provide the assistance you need before, during, and after your home renovations.
