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Home Improvement 2006  

Paying the price

  Once you've attached a price tag to your next project, check out if and how you can afford it.
Remodeling? Make sure you're insured
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Such policies tend to be short-term, typically running for about six months before they have to be renewed. They also tend to cost about 25 percent more than a homeowners policy, says Flannagan, but there is more risk involved when you're renovating your home, since your home will be exposed to more people and, again, in some cases outside elements such as the weather.

Insurance exclusions
Even if you have the proper insurance in place, there is still the unfortunate possibility that your house may be damaged inadvertently and insurance won't cover it, particularly if you're doing the renovations yourself.

"It's possible the insurance company will find you negligent in some way that they may deny your claim," says Carolyn Gorman, vice president of the Insurance Information Institute. "If you take your blowtorch and burn your house down, it's possible that they would (not pay for that)."

For that reason, there is more risk involved when you're doing a project yourself. A contractor that is found liable for something has insurance to pay for the damage. But if you do extensive damage to your home while trying to make renovations, you may simply be out of luck.

If a worker gets hurt on your property, he or she may be able to sue you in addition to suing the contractor. Check with your insurance agent to make sure your homeowners-insurance policy would cover that if it were to happen.

Insurance should not only be a big consideration before a home improvement project is started, but after the fact as well. Once the job is completed, it's important to follow up with your insurance company to make sure you have enough coverage for your newly renovated home.

"Over the last 10 years, many people have renovated their homes and they have added upgraded kitchens or bathrooms or decks and they fail to talk to their insurance company about adding additional coverage to their policy," says Gorman. "What that means is if they have a fire or other catastrophe they find that they are underinsured, which is a huge problem because that means if they have a complete disaster, they will not be covered."

The institute estimates that 60 percent of homeowners across the country are underinsured. After spending your hard-earned money renovating your home, you don't want to see your investment go down the drain because of a catastrophe.

Call your insurance agent even if you don't spend a ton of money. What you consider to be a small project may, in fact, add substantial value to your house.

"A lot of people make small renovations throughout the year and don't think about it," says Flannagan. "Those are the ones we see that aren't adequately covered. You renovate three bathrooms in your home and spend $25,000. You might not think about that. But in the event that you have a total loss, you've lost that $25,000 if you haven't increased your coverage to take into consideration all that new tile."

-- Posted: April 12, 2006
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