Does Homeowners Insurance Cover Renovations? An Overview

Oct 22, 2023 By Susan Kelly

Your home's diameter, shape, and the expense to reconstruct it in the event of a calamity all play a role in determining how much homeowners insurance you need. But what if you add a stack or a new kitchen, and those factors change? Does Homeowners Insurance Cover Renovations? So here is what you have to understand about house insurance if you're planning a makeover or renovation.

Should I Tell My Home Insurer About Renovations?

Ordinary homeowners' insurance plans often cover renovations. You should check with an insurance agent to ensure you're insured before you begin the renovations, just to be safe. This is significant for two reasons:

  • You may be underinsured if you make a remodeling that raises the cost of restoring your property.
  • Your current liability levels may not be enough if someone is harmed during the remodeling.

Using this as an example, here we go. Consider that you had $200,000 in house insurance. After you've paid your deductible, your insurance provider will contribute this amount to the cost of reconstructing your home in the event of a covered loss. Let's imagine you're planning a major kitchen remodel, employing higher-quality materials and increasing the size of your house. As a result of the renovations to the kitchen, your new reconstruction expenses are $250,000.

If you raise your policy limits to reflect the increased cost of rebuilding, you will be properly protected in the event of an accident. But, if you don't make the necessary changes to your coverage, you run the risk of being underinsured. Approximately $200,000 of the $250,000 in rebuilding expenses would be covered by your insurance, leaving you to foot the bill.

What Are The Most Important Policy Adjustments I Should Make?

Prior to starting any work, speak with your home insurance provider about whether or not your current coverage needs to be updated. In certain cases, your real estate agent may advise you to:

Build Up Your Home's Insurance Coverage.

For your insurance carrier to appropriately analyze your insurance requirements, the Insurance Information Association recommends that you be ready to provide your documents and invoices to them.

During The Remodeling, Raise Your Liability Insurance Limits.

Protecting yourself in the event that someone who does not reside in your home gets hurt while working on the renovations is made easier by having liability insurance. For DIY projects, this is particularly critical. The Institute of insurance information advises you to increase your plan's no-fault medical insurance. That way, if someone is hurt, your insurance company may pay their medical fees immediately. According to the III, this may lessen your risk of being sued.

After The Remodeling, Raise Your Liability Limits.

Consider permanently raising your liability coverage if your remodeling involves the addition of an "attractive nuisance," like a pool or hot tub. According to the III, purchasing an extra or umbrella insurance is a cost-effective option to expand your liability coverage.

Enhance Your Personal Goods Insurance Coverage.

You might need to increase your individual property policy limits if you spend a lot of money renovating. In other words, suppose you construct an extension to display a collection of artwork or comics and then add to it. A floatation or authorization may be required for any newly purchased valuables.

Incorporate "Dwellings Under Renovation" Coverage.

When you get renovation insurance, you'll be covered for any construction supplies that are either on your property or in transit to it. After all, items being destroyed or stolen from construction sites are not unknown. The insurance also covers the possibility of a collapsed foundation.

Insurance For An Empty House Should Also Be Considered.

Depending on the scope of the renovation, you may need to relocate while your home is being renovated. Vacant house insurance is a good idea if you'll be gone for 60 days or more. So you are covered even if the damage stays undiscovered for some time.

Is My Contractor's Insurance Necessary?

Don't hesitate to take a quick snapshot of your contractor's policy coverage, along with corporate business/general liability coverage and a policy for workers' reimbursement. In order to avoid a lawsuit from a worker who is injured on the job, you must ensure that the contractor you choose has proper insurance. To be on the safe side, avoid hiring a contractor who won't or can't verify their insurance.

Will Remodeling Raise My Insurance Premiums?

It's possible that a home remodeling can raise your insurance costs, but this isn't always the case. Insurance rates may rise as a result of home improvement projects. To put it another way, if you add an additional bedroom to your home, whether it be a separate owner's suite or an additional family room, you'll likely see a rise in your insurance premium. This is because the additional square footage raises the cost of constructing the house. As with higher-end items like marble or commercial-grade equipment, remodeling your house will raise the rebuilding costs and your insurance premiums.

The majority of home upgrades boost your premiums, but there are a few that may actually lower your rates. For example, your home will be more secure if you rebuild your roof with stronger materials or add shatter-resistant glass and wind shutters. Depending on the storm's severity, your insurance rates may decrease since your property will be better protected. Installing safety measures such as smoke detectors, deadbolt locks, and a burglar alarm in your home may also result in lower insurance premiums.

The Conclusion

No matter what kind of renovations you do, your current insurance limits may not be sufficient to cover the increased value and liabilities of your property as a result of the work you've done. Before the remodeling begins, be sure to check with your insurance provider to see whether your current policy will cover you enough. If this is not the case, you should do so prior to beginning any work. Keep your real estate agent in the loop if the remodeling takes on a larger scope, such as when you decide to install a hot tub.

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