Renovate or relocate — that is the question. If your current home is missing something you no longer want to live without, you probably want to weigh your options. Renovating a house gives you the flexibility to get the exact features you want, but it can come with unexpected challenges (like permitting delays) and additional costs (like higher homeowners insurance premiums). If you want to figure out if you should remodel or move, you have quite a bit to consider.
Some things you need to weigh on your own, like your family’s specific needs and the sentimental value of your current home. But as insurance experts, Bankrate can help you understand the home insurance ramifications of your decision to move or remodel.
Will remodeling affect my homeowners insurance?
Renovating a house does not always mean your home insurance costs will increase, although it might. In the “should I remodel or move?” debate, you should know that some renovations can actually help you save on home insurance premiums.
Generally, if you plan to make changes that will increase the value of your home or the level of liability on your property, you should inform your insurance provider. Failing to do so could leave you with insufficient coverage right at the moment you need it most. In fact, the Insurance Information Institute (Triple-I) recommends that you always notify your home insurance company before starting a renovation project.
To give you a clearer idea of the way your remodel could affect your home insurance — and to help you decide if you should renovate or sell — it can be helpful to look at specific renovations:
Adding square footage
When space is an issue, adding an extension can give you that home office you need or the finished basement for your teens to hang in, but it also means you need to update your homeowners insurance policy with your home’s updated characteristics and square footage. These changes might increase your premium since your dwelling coverage amount will likely increase.
That said, the update to your home insurance is well worth it. No one wants to be in a position in which they spend money on a renovation only to have the extension ruined by a disaster their policy could have covered.
If you have plans for a relatively simple kitchen upgrade — like replacing your backsplash or painting your cabinets — you probably can skip the call to your insurance company. But if you will be investing significant money in your kitchen renovation, such as upgrading your countertops from laminate to granite or upgrading your cabinetry to custom-made cabinets, ask if your policy needs to be updated. Because a kitchen remodel can make your home more expensive to repair or rebuild, you may need a higher level of dwelling insurance coverage once your newly beautified kitchen is complete.
Adding a pool makes your home riskier to insure because of the heightened likelihood of accidents on your property. That said, you might want to review your liability and other structures coverage listed on your homeowners insurance policy should you get a pool to help make sure your property coverage is sufficient. If you are debating whether you really want a pool, it pays to talk to your insurance provider before you make a decision. Knowing how much more you will need to pay for your home insurance and the risk pools can create can help you make an informed decision.
The good news is that some renovations might bring the cost of your coverage down. For example, bringing your wiring up to the latest building standards can mean a lower risk for your property insurer of paying out a fire claim. Because of that, the cost of your homeowners insurance may decrease if you update your electrical to the latest standards. Upgrading your wiring from outdated systems, like replacing knob and tube wiring, could even make your home eligible to insure with other carriers, giving you more opportunity to switch to a cheaper home insurance company if desired.
A new roof is pricey, but it may help you save money on your homeowners insurance. In fact, this is one instance in which you definitely want to inform your insurance company. A newer roof means better protection for your home, and that can bring the cost of your policy down.
Why does home remodeling impact my home insurance?
The remodel affects your home insurance costs because it impacts how much your insurance carrier might need to pay out to cover a claim of yours. The aforementioned pool could mean a hefty liability claim if someone slips and falls on the wet surface near it, for example.
Even renovations that do not heighten the risk of accidents at your home may require adjusting your coverage. Your remodel might increase the cost to rebuild your home after a covered loss, which means your insurance provider will need to modify your dwelling coverage amount to provide you with enough coverage.
Similarly, if your remodel involves bringing high-end appliances or new, more expensive furniture in to finish the space, you may need to increase your personal property coverage levels.
All told, renovating a house usually has a direct impact on the amount of insurance coverage a home needs. Save yourself from future headaches — and even huge out-of-pocket expenses — by factoring your home insurance into your decision to renovate or sell.
Do I need to increase my homeowners insurance during renovations?
When your home is being remodeled, it may be exposed to more risk. If you need to store materials in your yard before they can be installed, for example, they may need protection. Some homeowners insurance companies offer a temporary add-on called a builder’s risk endorsement to help layer on the protection you need while renovating.
Again, the best way to make sure you have the right level of home insurance — both during your renovation and once you finish — is to call your insurance provider and talk through your planned project with them.
Your contractors should all have insurance, too. Confirm that they are properly licensed and have their own insurance policies to protect you before their work begins.
Does my home insurance company need to know about all renovations?
When you have to decide whether to renovate or sell, involving your insurance company might feel like a layer of complexity you would rather not add on. And if your remodel is purely cosmetic and does not change the value of your house, you may not need to tell your insurance provider. For example, if you repaint your home, you do not need to inform your homeowners insurer because that does not change the rebuild value of your home.
However, failing to notify your insurer of actual renovations can be a risky undertaking. If you have an incident with your finished remodel and your coverage has not been updated to cover the added value, you might be left paying out-of-pocket for the difference.
What happens to my home insurance when I move?
If all of this has you feeling like relocating is the call, you should know that there are home insurance ramifications whether you move or remodel. Specifically, if you purchase a new house, you will almost definitely need a new home insurance policy for it.
If you will have a mortgage, your lender will likely require a home insurance policy as a condition for your financing. But even if you plan to pay cash for your new home, you probably want to buy coverage to protect your investment.
That means putting a policy in place when you take ownership of your new place and canceling your coverage at your old house if and when you sell it.
Is it more expensive for my insurance to move or to remodel?
That depends on the remodel you plan and the homes you think about buying. You can get a home insurance quote for properties you are considering and ask your insurance provider about how the remodel would affect your current home insurance policy. That way, you can compare the cost of each to get a better idea of whether you should remodel or move.
Frequently asked questions
Will home insurance cost more after a remodel?
That depends on the renovation you have planned. Adding a pool will probably mean paying more, for example, but adding a new roof could bring the cost of your coverage down. The only way to know what your remodel will mean for the cost of your home insurance is to call your insurance provider and ask.
Do I need insurance for my renovation?
You may, especially if you plan a major remodel. Call your insurance provider to see what your options are. You may be able to add an endorsement to your policy to layer on protection while your project is underway, or you may need to buy a separate policy to be in force while you remodel.
Is it cheaper to remodel or move?
Again, that depends on both the renovation you plan and the homes you would consider buying. You also need to factor in specific costs, like a builder’s risk policy, to protect a bigger-scale renovation or moving costs if you buy a new house. Crunch the numbers on your specific situation.
To make sure you have the most (and most accurate) information possible, you may want to call your insurance company and have them price out both scenarios for you: the cost to insure your house after your remodel and the cost of a policy for the new house you may purchase.