Can Renovations Affect Home Insurance Costs?

04 Dec
DIY Renovation Gone Wrong

If you play on going the DIY route you may want to up your liability coverage or put an umbrella policy in place if you plan on enlisting the help of friends and family.

Renovating your home can be a challenge but it also provides a number of benefits. In addition to updating your living space and improving your property’s features and resale value, a renovation can also lower your homeowners insurance premium if you add certain features or use specific materials.

While one of your first calls in the renovation process will be to a contractor, you should also put your insurance agent on the short list of phone calls to make as well. Your agent may be able to tell you what type of improvements may result in a discount as well as if you need to update your policy to include additional square footage or added liability risks.

Liability Should be Considered

Whenever you have contractors in the house you need to make sure they are protected with the proper insurance. Always ask for proof of insurance for anyone that is working in your home. Contractors should carry a commercial business policy, general liability coverage as well as workers compensation for any employees that will be working at your home.

If a worker is injured on the job at your house and the contractor is not carrying the proper coverage, you may end up on the hook for some huge medical bills or a lawsuit.

If you are still concerned after checking your contractors policies there are ways to up your coverage to make sure you are fully protected. An umbrella policy can up your liability coverage, they are sold in $1million increments and are very affordable.

You may also want to consider a builder’s risk policy, especially if your home is undergoing extensive renovations. These policies protect you in the event that your home is damaged during construction. It also protects against vandalism and the theft of building materials at the work site.

If you play on going the DIY route you may want to up your liability coverage or put an umbrella policy in place if you plan on enlisting the help of friends and family. While you may think your friends or extended family wouldn’t sue if they were injured, it does happen and more often than you think.

Renovations May Lower Your Rates

There are renovations that can end up lowering your insurance coats. As an example, upgrading your roof with wind and hail resistant materials can result in a significant discount on your rates. Adding hurricane straps to your roof, which help keep the roof in place during high winds, will also result in a discount on your premium.

If your renovation results in upgraded mechanical systems you may also be eligible for a discount. Brand new heating and air conditioning systems, water heaters and electrical or plumbing upgrades are less likely to malfunction, lowering your risk of a fire or water damage claim. Insurers love upgrades that lower their risk and are willing to offer a discount if you have them installed. Adding a sprinkler system or monitored security system will also result in a significant discount. While sprinkler systems can be expensive, most insurers offer a major rate drop if you have one installed.

Renovations May Up Your Insurance Costs

Homeowners insurance rates are based on the cost to rebuild your home not the market value of the house or what you paid for the home. Renovations can increase the cost to rebuild your home if you add square footage or upgraded materials and this will lead to higher insurance rates.

An addition to your home increases the square footage that would have to be repaired or rebuilt if your home was damaged so naturally this will increase the cost of your homeowners coverage. The same rule applies if you are finishing off a basement or attic, if you are increasing your living space you will most likely have to up your insurance coverage.

Even if you are not adding square footage, your rates may increase. Kitchen and bathroom updates are one of the most common renovations and if you are upgrading to higher end materials this will result in higher rebuilding costs, which means a higher premium.

If you fail to notify your insurer of the upgrades and your home is damaged or destroyed you may not have enough coverage to completely repair your home. Always notify your insurer after renovating or upgrading your home to ensure you are fully covered.

Major Risks Bring Major Premium Increases

If you are thinking about putting in a pool, hot tub or trampoline, expect your rates to go up significantly. Insurers hate risk and a pool presents a very big risk when it comes to accidents or even a drowning. In most cases, if you have a pool or trampoline you should absolutely raise your liability coverage or put an umbrella policy in place.

There are a few things you can do to make the rate increase a little more affordable. If you are putting in a pool consider adding fences, pool covers, alarms, and self-locking gates to keep out unwanted swimmers. The same is true for trampolines, tree houses and other backyard fun items that can result in an injury.

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