How Will Renovations Affect My Homeowners Insurance?

No matter what size your home is or where it may be located, making renovations can provide quite a few benefits. If you want to finish your attic or basement, wish to add another bathroom, or even need to totally revamp your kitchen, making improvements can make your home more livable while also adding value to your home overall.

Nevertheless, many of us do not realize how these house projects can affect our homeowners insurance until it’s too late. That said, the following is a list of ways in which making renovations to your home can affect your homeowners insurance.

Rate Reductions

While many homeowners tend to avoid making renovations due to the financial costs, making certain changes could serve to substantially lower your homeowners’ insurance. For instance, given the major role the roof plays in maintaining your home over time, repairing or renovating your roof can save you from 10 to 20% on your home insurance premiums.

On another note, while upgrading areas such as the kitchen or bathroom may add to your rates, this can also be a way to receive a discount as well. Often time, when you are doing renovations that require a plumber, you may be automatically upgraded to the latest, safest, and most cost-effective system as these materials are often the most readily available. Therefore, if your system allows you to save water or otherwise makes your kitchen or bathroom more efficient, you could also receive a rate reduction after making such improvements.

Rate Raises

On another note, there are also plenty of renovations that can cause your homeowners insurance to increase as well. This is due to the fact that some added amenities are considered ‘attractive nuisances’ by the home insurance industry. For instance, while adding a pool may add lots of entertainment and aesthetic value to your home, it is also a risky investment due to the level of upkeep required as well as the dangers associated with owning a pool in general. Therefore, installing a swimming pool could actually serve to raise your home insurance rates. Additionally, it may also force you to invest in added safety measures such as installing a fence around the pool, buying protective covers for the pool, etc.

Also, if you are building an office for a home-based business, your equipment may only be protected up to a certain value. This means if you plan on installing a high-tech, state-of-the-art home office, you may have to add insurance to ensure the total value of the equipment you installed is protected. On another note, adding on to your home will also likely raise your premiums. Your present cost of home insurance is based on the size and composition of the home when it was purchased. Adding to your home is the same as adding value to your homeowners insurance policy which can increase your insurance rates.

Coverage Gaps

Another thing to be concerned with is how a home renovation can create gaps in insurance coverage. For instance, as mentioned, renovating the kitchen and bathroom areas can cause rate increases while also making you eligible for discounts. Nevertheless, depending on how lavish you decide to make your new kitchen or bathroom, this may result in a gap in coverage. If you are upgrading from reasonably priced materials to more expensive ones, the full value of your new kitchen or bathroom may not be covered. Depending on how much is being spent, this could cause a gap in coverage of hundreds or even thousands of dollars. The best method of avoiding this is to consult with a homeowners insurance agent before, during, and after making these changes to your home.

Liability Coverage

If you are embarking on a large-scale renovation that requires the use of a person or team of contractors for an extended period of time, you may need to add extra coverage to ensure the workers are covered in case of injury. While there is often coverage through your present homeowners insurance policy, it will likely be insufficient if you are making renovations that will take weeks or months to complete. Therefore, you may need to update your homeowners insurance policy or purchase a separate policy to address this issue, in particular.

Vacating the Premises/ Losing Coverage

If you are making a home renovation that cause you to vacate your home for an extended period of time, you could also temporarily lose coverage. Since most home insurance policies are created to cover your home while you are living in it, it is possible that you could lose coverage, in the event that you have to leave your home for a lengthy period of time. Moreover, many homeowners do not realize that some renovations may require the home to be vacated at some point. Additionally, there are also times in which emergency situations require some families to vacate their homes immediately and indefinitely. Therefore, you may want to consult with your homeowners insurance provider in order to find out how being absent from your home for a prolonged period of time could affect your coverage.

Overall, there are plenty of ways in which making renovations to your home can affect your homeowners insurance policy. To avoid the pitfalls, be sure to consult with your insurance company as well as an insurance expert you can trust.