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Home Improvement Guide 2007
On the money
Whether it's a fresh coat of paint or a total home renovation, sooner or later it comes down to paying for it.
On the money
Insuring home improvement success

When you're planning to spend thousands of dollars on home improvements, the last thing you want is for your investment to go down the drain. For that reason, it's crucial to make sure you've taken all the necessary steps to insure your project before you begin.

Steps to take:
1. Contact your insurer.
2. Find an insured contractor.
3. Get building permits.
4. Estimate the project's worth.
5. Review your policy.

Step one: Contact your insurer
Major renovations can leave your home exposed, physically and financially. Those new French doors could be stolen before they are installed. Major roof work might leave your home exposed to the elements, some of which might not be covered under a regular homeowners policy.

In such cases, adjust insurance coverage temporarily. "During construction, there may be some kind of insurance rider just in case there's an accident or something that protects you in addition to your insurance coverage," says David Lupberger, a home improvement expert for ServiceMagic, a company that matches contractors with homeowners. Talk to your insurance agent about what you're planning, and he or she can guide you through short-term coverage options.

Step two: Find an insured contractor
When hiring a contractor, check to see whether that person is properly insured. "Make sure they have workers' compensation for their employees and have general liability insurance for the company," says Lupberger. "What that means is when a professional contractor is working on your house, if a worker is injured, you're not liable. If the contractor damages something, destroys something or burns your house down, you're protected."

Likewise, if something happens to the contractor's tools or equipment while the project is being completed, his insurance will pick up those costs. Uninsured contractors may charge you less for the job, but you'll pay the price if something goes wrong during the renovations. And even if a contractor tells you he's insured, don't take his word for it. "Have the contractor show you a certificate of insurance," Lupberger says.

What if you decide to do the project yourself? "In that case you don't so much have a liability or a third-party liability issue," says Richard Standring, program manager for risk management advisory services for Fireman's Fund Insurance Co.. As a result, there's no need for workers' compensation or general liability insurance. But, depending upon the scope of the project, your insurance agent may suggest you hire a professional instead. "We would never recommend that a policyholder go out and do any type of work that would require a license, especially around an electrical or plumbing system," says Standring. Also, if you damage your property in the process and your insurance provider determines that your negligence caused the mishap, it might not pay the claim.

-- Posted: April 4, 2007
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