Planning a home renovation can involve fun activities, such as designing a new floor plan or picking fixtures and paint colors. Having a heart-to-heart with your home insurance carrier may not be part of your preparations, but it should be.
Many house improvements that boost your home’s value could render your home insurance coverage inadequate and leave you vulnerable to losses. Other upgrades may trigger lower premiums–savings you don’t want to miss simply because you didn’t think about your home insurance during renovation.
Here’s how five common home upgrades or repairs can affect your homeowners insurance policy by either boosting or lowering the cost.
1. New roof: Lower
A new roof may not be the sexiest home improvement, but it sure can save a lot of cash when it comes to homeowners insurance, cutting your premiums by 10 percent to 20 percent, says Jim Towns, an Allstate Insurance agency owner in Illinois.
“The roof is probably the single biggest factor affecting your policy,” he says. “That’s where the majority of losses due to snow, wind, hail and rain occur.”
Some homeowners can get even bigger discounts if they live in hurricane-, wind- or hail-prone states and their new roof employs special loss-mitigation measures, such as hurricane straps, waterproofing or the very best shingles.
While most home policies cover roofs, some insurers use depreciation schedules based on the age of the roof to determine how much protection you get, says Hutchinson. Based on the age of the roof, some policies won’t cover it at all. But the newer the roof, the more the insurer will spend to replace it. Consider adding flood insurance if you live in a flood-prone area as your flood insurance could cover the cost of damage or leaks to your roof.
2. New pool: Boost
A pool may make you the most popular house on the block, but it means your home is the riskiest from an insurance standpoint.
“This is what our industry calls an ‘attractive nuisance,'” says Griffin. “Everyone in the neighborhood wants to play in your pool. It increases your exposure to loss.”
The standard policy usually comes with $100,000 in personal liability protection, which would cover medical costs for a person injured in your pool and any legal expenses if you’re sued. However, an insurer may recommend that a pool owner opt for at least $500,000 in liability coverage.
The insurer also may require a fence around the pool with a lock to cover the newly built liability, he says. If the pool has a diving board or slide, it will be considered an even greater potential hazard.
3. Office for a home business: Small Boost
Say you want to go full time making reclaimed-wood furniture at home for your Etsy site. Will your home insurance cover the assets of your newfound business?
Most homeowners policies protect equipment for home-based businesses up to about $2,500, says Hutchinson. That might not be enough for a business owner who uses specialized machinery or stores large amounts of supplies or inventory. Fortunately, you may need to just bolster your existing policy.
“It could be as simple as adding a rider or endorsement,” says Lemons. “Or, depending on the complexity of the business, you may have to purchase an additional business policy.”
That’s particularly true if your business is the type that creates heavier foot traffic in your home, such as piano lessons or private yoga sessions.
However, if your business doesn’t bring visitors to your home and requires little equipment or supplies outside of a basic computer, your existing home policy should do the trick.
4. More living space: Boost
Sometimes a home needs to grow to accommodate an expanding family. That can mean adding more livable square footage, such as in a dank basement or humid attic above the garage. In other instances, a new addition may be in order.
Your insurance will need to be altered to account for the value of the new space.
Let your insurer know about any major addition before you begin, says Towns. “Say you put on a room addition and three-quarters of the way through, a fire destroys it,” he says. “You want that to be covered.”
You may need to consider other types of coverage for the newly built areas of your home. A finished basement with new carpet, drywall and insulation may need water backup coverage if the sump pump is located there, says Towns.
5. Kitchen and bath upgrades: Boost (And sometimes lower)
Sometimes nothing can give a house the facelift it needs quite like making over a kitchen into a chef’s dream or a master bathroom into a spa sanctuary. But unless you give your home insurance a makeover, too, the renovation may be at risk.
For example, say your insurer based your coverage on a kitchen with laminate countertops and generic cabinets. But then you spend $40,000 on granite countertops, custom cabinets and top-of-the-line appliances. Would your existing coverage be sufficient to rebuild your remodeled kitchen after a disaster?
“Most often, the answer is no because people don’t keep up (their policy) with the additions and alterations they are doing,” says Lemons. “And they don’t realize it until after a loss.”
He recommends not only calling your insurer about the renovation but also providing records and photos to validate what you’ve done. Your premium most likely will go up because your home is worth more.
One small bonus: Your contractor may upgrade the home’s electrical or plumbing systems during a kitchen or bath renovation, especially in older homes. So, you could wind up with an insurance discount.
To protect the full value of your home, you will need to update your home insurance after renovation. To be on the safe side, you should let your insurer know before you make the renovations in case something goes wrong during the process.
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