Can Renovating Your House Lower Your Insurance Costs?

When most homeowners consider renovating their homes, they focus on resale value and maintenance costs rather than the implications for their insurance. However, depending on the type of work done, a home improvement can increase or decrease the cost of coverage for your property.

Features that protect your home from damage may earn you a lower rate, whereas those that increase the value of your home may necessitate a higher and more expensive policy limit. We compared online quotes from five major home insurers to see how some of the most popular home improvement projects affect insurance costs.

Newer, stronger roofs have the highest impact on home insurance rates

Roof work had a greater impact on insurance costs than any other category of improvements we looked at. According to our online quotes, a home with a brand-new roof would cost $239 less to insure per year than one that had never been replaced since the home was built in 2004.

How much does a new roof save on your home insurance?

Based on quotes for a $350,000 home built in 2004

As with exteriors, the material used to construct a roof can have a significant impact on your homeowners insurance premium. The more durable a roof, the less likely a claim for leakage or hail damage will be filed.

Roof material vs. annual home insurance costs

A house with a steel or tile roof cost significantly less to insure than a house with typical asphalt roofing, according to the five insurers from whom we obtained quotes. Clay or concrete tiles resulted in the largest discount (22 percent) on homeowners insurance, most likely due to their longer expected lifespan when compared to a standard asphalt shingle.

The only alternative roof material that increased insurance costs was wood, which typically requires more maintenance than asphalt and is more prone to damage. According to our data, replacing an asphalt roof with wooden shingles or shake could result in a 14 percent increase in your annual premium.

Upgrading your exterior may reduce potential damage, but pricier materials raise replacement costs

Aside from improving curb appeal, upgrading the exterior material of your home can reduce the risk of damage from leaks and storm debris. However, because stronger materials are more expensive, you may need a higher — and more expensive — dwelling coverage limit in your insurance policy.

Insurance cost based on quotes for a $350,000 home built in 2004

Vinyl siding, which consists of vinyl strips with interlocking edges, is the most popular exterior construction for single-family homes in the United States.

The insurance implications of exterior improvements were discovered to be dual. By selecting a more durable, low-maintenance material, insurers may view your home as having a lower risk of a claim for dwelling damage. For example, replacing vinyl siding with more durable cement fiber siding resulted in a slight decrease in our premium.

However, insurers may require you to obtain a higher coverage limit in order to account for the higher cost of replacing that material if it is damaged. When we used wood or brick as the exterior material instead of vinyl, the cost of coverage increased because both materials cost more than vinyl and increased the amount of coverage required.

Adding home security systems doesn't significantly lower home insurance rates

Some home insurers advertise discounts to homeowners who report having fire, leak, and burglary monitoring systems. However, based on our data, the actual savings on your insurance bill may be close to zero, especially when compared to the cost of the devices.

Home security discounts by provider

Based on annual estimates from insurers' web-based quote forms

We obtained quotes from five major insurers and discovered that two of them, Allstate and Farmers, did not inquire about home security at all on the online quote form. Among the rest, centrally monitored fire alarms resulted in a 1% to 5% discount, while adding a local burglar alarm reduced rates by no more than 2%.

When the differences we discovered are applied to the average amount that homeowners spend on insurance, the savings range from $14 to $72 per year. Installing such alarm systems and subscribing to the services that power them, on the other hand, can cost thousands of dollars per year.

Methodology

We compared the effect of various property variables on prices at five major insurers by analyzing home insurance quotes for a representative address in the United States:

• Allstate
• Farmers
• Liberty Mutual
• Nationwide
• State Farm

We used the provider's web-based quote form for each insurance provider to obtain an estimate of annual premiums for various combinations of home characteristics. These included roof age, roof material, and exterior construction, as well as any available home security discounts.

RoofingCalc and Modernize were used to calculate the average cost of roof and exterior materials.