Insuring home improvement success
Get building permits
Some jobs require building permits, particularly
if the structure of your home will be changed.
In these instances, work must adhere to building
codes. Your city or county government can
tell you whether your project is under this
category. If so, have the contractor apply
for the permits. Once the job is done, a building
inspector will inspect the work, says Carolyn
Gorman, a vice president with the Insurance
the work fails the inspection, the contractor is liable and has to make adjustments.
Incompetent builders can have a tremendous effect on your home's coverage. If
you add a room to your home and it does not meet building codes, your insurer
could refuse to cover it.
four: Estimate the project's worth
Every home improvement project
need not warrant a change to your home insurance policy. If you buy a new refrigerator,
change one or two appliances or upgrade one of the bathrooms, there's probably
no need to make revisions. "But any time you're investing more than $25,000
back into the value of your home, your insurance company should really be on notice
of that change," says Standring. If unsure, err on the side of caution and
check with your agent anyway.
five: Review your policy
Once the project is complete, your insurer
can help you determine how much value the work has added. This information is
crucial: You want the homeowners policy to reflect the new, upgraded value of
your home. Say your home is insured for $200,000. Add an expensive addition but
fail to revise the policy, and it's like the work didn't happen. If your house
burns down, what proof do you have of any improvement work?
it's time to rebuild, your insurer is not going to give you any more than $200,000
because that is the policy limit," says Gorman. There is an exception to
this rule. If you have an extended replacement cost policy, it pays a certain
percentage -- generally 20 percent to 25 percent -- over the limit to rebuild
your house. While such a policy would cover minor renovations, you will no longer
be adequately covered if you increase the value of your home by more than 25 percent
through the improvements you've made.