You’re redoing your house to better fit your lifestyle, but you’re not sure how this will influence your insurance. What does a home renovation mean for your homeowners coverage?
Certain renovations will raise your rates, while others may provide insurance discounts and savings. Know how your house renovation will influence your insurance rates, so you can be fully prepared for any changes in coverage or cost.
Raises Your Rates
Adding an addition
If you add a new room to your house, you are also adding more “value” and square footage. This means that your homeowners’ insurance will increase in accordance with the new square footage of your addition. Homeowners’ rates are largely based on how much it would cost to rebuild your entire house in the case of a devastating disaster. More house means more cost to rebuild, and your premiums will show that increase in response.
Do not wait until after the addition is complete to tell your insurance agent and get coverage. You could be two weeks away from finalizing a new wing on your house, and an electrical fire completely burns down the new addition. Without insurance, you have no way to get back the money that you just spent on that renovation. Having insurance from the moment you get a builder and permit can help cover from disaster that could happen at any point during or after the construction.
This is especially important as construction times are considered “high risk” for theft and damage. It’s crucial to protect from that risk.
Adding a home office
If your addition is specifically for a home office, you may need to adjust your homeowners insurance and business insurance. There are certain specifics for home businesses, especially if you will have people coming into your home in a way that could affect your personal liability. Check out our article about small businesses and home businesses to learn more about how to approach homeowners’ and business insurance appropriately.
Converting unlivable space to livable
If you are converting a garage, attic, or shed to a living space, you may need to change your insurance. If that space is already covered under your homeowners’ insurance liability and property, your insurance might not change. However, if that area was not before covered, you’ll need to add this new space on your homeowners’ insurance in order to protect from any possible property damage, theft, or liability in that area of the house.
If you are converting a garage, you may need to adjust your car insurance as well. If you will now be housing your car on the driveway or street, your auto rates will likely increase because it is considered riskier to house a car outside of a garage.
If the newly transformed space is going to be used as an apartment, you may need to consider landlord insurance. This is true even if a family member is renting the apartment.
Renovating current rooms
Even if you are not adding any additional space, renovations may boost your homeowners insurance because of added value to the contents.
For example, if you’re putting in granite countertops and hardwood floors, these are considered a high value investment in your property. You may want to include this on your home inventory to protect from future damage. The same is also true for new appliances and furniture.
Your house was hit by some sort of disaster, and you made a claim with your insurance company. You’re new rebuilding your home with the help of that insurance money.
Likely, your future rates for homeowners’ insurance will increase because of that renovation. Every claim makes you seem “riskier.” The riskier you are, the higher your premium is.
This does not mean you should be hesitant to put a claim in with your insurance company. Nevertheless, you should be aware that each claim could affect your coverage. In this way, when you renovate your home post-damage, you should try optimize for potential safety insurance discounts, as you’ll see below.
Building a pool
If you’ll be adding a pool, you’ll also be adding a lot of risk to your house. These “attractive risks,” like pools and trampolines, will always raise your homeowners’ premium. Learn more in our article, “The Basics of Insuring A Swimming Pool.”
You may want to consider getting additional coverage during your construction period. Construction increases the risk of theft and injury on your property. A slight increase in coverage with an umbrella policy could be useful during this time period.
You should also ensure that your contractor has insurance as well. Only hire contractors that are licensed, bonded, and willing to show their insurance policy. Their insurance should include workers’ compensation, general liability, and builder’s risk at the minimum. It’s in your right as their client to ask for proof of this insurance.
If you will be doing the construction yourself, you should talk to an insurance agent about boosting your personal liability coverage. If you’ll be hiring workers to do the work, you may need to offer workers’ compensation and disability as well.
Lowers your rates
Adding safety features
Installing smoke alarms, gas detectors, shatter-proof windows, and security systems can help lower your homeowners rates. Talk to an insurance agent about home safety discounts before beginning any renovation. For a little bit of money, you’ll get a lot of security…and a safety discount towards lowered insurance rates.
Replacing HVAC system
Outdated furnaces and ACs are considered an electrical hazard and increased risk. If you replace the HVAC system with a reputable company, the system will be considered less of a risk. Lower risk means lower insurance.
Additionally, a good HVAC system can help increase air quality. Air purification systems and humidifiers can help remove dangerous allergens and better the health of your family and home.
Replacing electric or plumbing
In a similar vein, updating your electric or plumbing systems may help lower risk of damage or electrical fire. This may make you eligible for certain insurance discounts.
Putting a fence around your backyard and/or pool may qualify for a safety discount.
A large majority of homeowners claims come from roof damage. According to the III, the national average claim for roof damage caused by wind, hail, snow, and water damage is $14,216. The risk for claims is higher with old roofs and certain type of roofing materials. Replacing with updated, durable roofing can help lower future insurance costs.
The Bottom Line
Changing your house is exciting and thrilling. Protect your new assets by ensuring proper homeowners coverage. Moreover, consider implementing safety features for insurance discounts to offset any insurance increases from renovations.
Want help finding the right homeowners insurance for your home renovation? Get quotes within minutes and talk to a specialized agent to find the perfect coverage, discounts, and solution for your home.