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.
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