Are Your Renovations Covered by Homeowners Insurance?

Are Your Renovations Covered by Homeowners Insurance?

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The size and scope of your home renovation will determine whether you need to make updates to your homeowners insurance policy either before construction or after your project is complete. Small interior projects will require minor adjustments, while larger renovations — like a brand new kitchen, roof or pool — will call for updates to your policy before the project starts and after construction wraps up.

It's important to review your current policy and speak to an agent about your specific plans to get a better understanding of how to protect your home throughout the renovation process.

Do I need homeowners insurance for renovations?

When you're planning a home renovation, you need to review your homeowners insurance policy at two points during the process — before you begin construction and after the work is finished. Depending on the project, you may need to make changes to your policy at both stages.

Homeowners insurance during construction

Before your contractor begins remodeling your home, you will need to make adjustments, and possibly additions, to your home insurance policy. Here are a few of the most common changes you'll want to consider making before renovations begin:

Increase your liability and medical insurance during construction

Your homeowners insurance policy includes liability and medical coverage, which protect you if someone is hurt while working in your home. Professional contractors should carry workers' compensation insurance in case any of their team members get hurt. However, if you plan to tackle any of the renovations yourself or with the help of friends and family, it's important to adjust your coverage.

No-fault medical coverage will pay for health care for anyone who gets hurt on your property, which may help you avoid a lawsuit. If a family member or friend has an accident, your insurance company will reimburse them for medical costs like deductibles and copays. Liability coverage will protect you against a lawsuit if someone is seriously injured.

Increase your personal property insurance during renovation

If you're undertaking a big construction project, you'll have strangers working in your home every day. Evaluate your personal property limits to make sure that all of your valuables are covered against accidental damage and theft.

Add "dwelling under construction" coverage to your homeowners insurance policy

Most homeowners insurance policies don't cover theft during large renovation projects. Construction sites are magnets for vandalism, robbery and even arson, especially when materials and supplies are stored out in the open.

Every company has a different definition of "under construction," so before you start renovating, check with your insurance company to see if your project falls into that category. To make sure you're properly insured, you can add "dwelling under construction" or "under renovation" coverage to your existing policy for an additional premium.

Add vacant home insurance during construction

Vacant or unoccupied home insurance is an important add-on whether it's not safe to live in your house during construction or you just need a break from the dust. If you're living elsewhere for 30 days or more, your homeowners policy may not cover fire, liability, vandalism or other claims while you're away. Your insurance company may offer vacant or unoccupied home insurance as a separate policy or as an endorsement that you can add on to your existing home insurance policy.

If you have to purchase a separate policy, you will need to cancel your current homeowners insurance until you move back into your house.

Homeowners insurance after renovation

Once you've completed your home renovations, you'll need to reevaluate your homeowners insurance policy to make sure that your upgrades are properly covered. Here are the two most important changes to consider:

Increase your replacement cost coverage Replacement cost refers to the amount that it would cost to rebuild your home in the event of a total loss. Whether you're installing a new kitchen or replacing carpet with hardwood flooring, when you make improvements to your home, the cost to rebuild it goes up. In most cases, insurance companies require you to insure your home for a minimum of 80% of the actual replacement cost. That's why it's important to provide your homeowners insurance company with information about any upgrades you make.

Increase your liability coverage Some home improvements may make your home less safe — at least in the eyes of your insurer. If you're adding a new swimming pool or hot tub, consider raising your liability insurance to protect you from potential lawsuits.

Which home improvement projects affect homeowners insurance?

Some home renovations will increase your home insurance premiums, while others may make you eligible for discounts. Here are some of the most common home renovation projects and how they might affect your homeowners insurance costs:

  • Home alterations and additions will increase the cost to rebuild your home. You will need to raise your replacement cost coverage to ensure that your home is completely covered.

  • Replacing your roof is the top home improvement to lower your insurance premiums because a new roof decreases the chance of a claim for hail damage or leaks. The material used to build your roof can also affect your homeowners insurance premium.

  • Kitchen upgrades may require you to raise your replacement cost coverage, but it depends on the extent of the renovation. If you're giving your kitchen a face-lift by installing new countertops and painting cabinets, it may not increase the cost to rebuild your home enough to warrant raising your insurance. However, reworking the floor plan, replacing kitchen cabinets and upgrading appliances would require you to reevaluate the replacement cost of your home.

    We recommend contacting your homeowners insurance company to see whether an increase in your replacement cost coverage is necessary. A brand new kitchen may also mean updating electrical systems and plumbing in an older home, which could result in a discount.

  • Bathroom remodels are similar to kitchen renovations — whether you need to increase your insurance coverage depends on the upgrades. Keep in mind that upgrades like a sauna or steam room can result in higher insurance premiums. These features can cause structural damage to your home in the form of mold or mildew and also require higher liability limits because they increase the risk of injury.

  • Building a home office may not directly impact the replacement value of your home, but working from home may warrant an insurance upgrade. Depending on the type of work that you do, you should consider:

    • Increasing business property limits if you have electronics or other equipment that goes above and beyond your standard coverage.
    • Adding home-based business coverage if you are a freelancer, work from home often or operate a business that doesn't serve clients in person.
    • Self-employed homeowners usually need separate business insurance, like a business owners policy.

  • Backyard upgrades can merit an increase in replacement or personal property cost coverage and liability insurance.

    If you're adding a swimming pool, the type of pool that you choose makes a big difference. In-ground swimming pool damage claims are uncommon because these pools are not at risk for fire, water and wind damage. Adding an in-ground swimming pool will increase your premium by about $50 a year. Above-ground pools are typically viewed as personal property, so make sure that your personal property limits are high enough to cover the cost of a replacement.

    Swimming pools are considered an "attractive nuisance" by insurance companies because they pose a large risk to homeowners and their visitors. We recommend increasing your liability coverage to protect you against potential lawsuits.

    Other backyard upgrades like patios, gazebos and outdoor kitchens are more straightforward. Make sure that your new renovations are accounted for in your replacement cost coverage so that they can be rebuilt with the same finishes if you have a claim.

  • Hurricane-proofing your home if you live in a coastal area will usually result in a discount on your homeowners insurance policy. On average, homeowners who invest in hurricane shutters, storm windows and hurricane ties for the roof save an average of $42 a year. More importantly, these improvements make it less likely that homeowners will have to make claims after small storms, which will help keep premiums low over time.

What insurance should my remodeling company have?

When you get home renovation quotes from contractors, make sure that you ask for copies of their insurance policies. Professional contractors will have commercial liability insurance and workers' compensation policies.

They may also have a builder's risk insurance policy or construction insurance, which protects your home against vandalism or theft while it's under construction, along with your renovation materials and tools.

If your contractor doesn't carry a builder's risk insurance policy, you may need to purchase one. The cost is typically 1%-4% of the overall budget of your project. Many major insurance companies provide this coverage, including:

  • Hartford
  • AIG
  • Chubb
  • State Farm
  • Nationwide
  • Zurich
  • Liberty Mutual
  • Admiral Insurance Brokerage Corp.
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