Are Your Renovations Covered by Homeowners Insurance?

The size and scope of your home renovation will determine whether you need to make changes to your homeowners insurance policy before or after construction. Small interior renovations will necessitate minor changes, whereas larger renovations, such as a new kitchen, roof, or pool, will necessitate policy updates both before and after construction.

To get a better understanding of how to protect your home during the renovation process, review your current policy and speak with an agent about your specific plans.

Do I need homeowners insurance for renovations?

When planning a home renovation, you should review your homeowners insurance policy twice: before you begin construction and after the work is completed. Depending on the project, you may need to make policy changes at both stages.

Homeowners insurance during construction

Before your contractor begins remodeling your home, you must make changes and possibly additions to your home insurance policy. Here are a few of the most common changes to consider before beginning renovations:

Increase your liability and medical insurance during construction

Your homeowners insurance policy includes liability and medical coverage, which protects you in the event that someone is injured while working on your property. Workers' compensation insurance should be carried by professional contractors in case any of their team members are injured. However, if you intend to do any of the renovations yourself or with the help of friends and family, you must modify your coverage.

No-fault medical coverage will pay for health care for anyone injured on your property, potentially saving you from a lawsuit. If a family member or friend is injured in an accident, your insurance company will reimburse them for medical expenses such as deductibles and copays. If someone is seriously injured, your liability coverage will protect you from a lawsuit.

Increase your personal property insurance during renovation

Every day, strangers will be working in your home if you are undertaking a large construction project. Examine your personal property limits to ensure that all of your valuables are protected from accidental damage and theft.

Add "dwelling under construction" coverage to your homeowners insurance policy

Theft during large renovation projects is typically not covered by most homeowners insurance policies. Construction sites attract vandalism, robbery, and even arson, especially when materials and supplies are left out in the open.

Every company defines "under construction" differently, so before you start renovating, check with your insurance company to see if your project falls into that category. For an additional premium, you can add "dwelling under construction" or "under renovation" coverage to your existing policy to ensure you're properly insured.

Add vacant home insurance during construction

Vacant or unoccupied home insurance is an important add-on if it is unsafe to live in your home while it is being built or if you simply need a break from the dust. If you're gone for 30 days or more, your homeowners insurance may not cover fire, liability, vandalism, or other claims. Your insurance company may provide vacant or unoccupied home insurance as a separate policy or as an endorsement to your existing home insurance policy.

If you must purchase a separate policy, you must cancel your current homeowners insurance until you return to your home.

Homeowners insurance after renovation

After you've finished your home improvements, you'll need to reevaluate your homeowners insurance policy to ensure that your improvements are properly covered. The following are the two most significant changes to consider:

Increase your coverage for replacement costs. The cost of rebuilding your home in the event of a total loss is referred to as the replacement cost. When you make improvements to your home, whether it's installing a new kitchen or replacing carpet with hardwood flooring, the cost to rebuild it rises. Most insurance companies require you to insure your home for at least 80% of the actual replacement cost. That's why it's critical to inform your homeowners insurance company about any improvements you make.

Increase your liability insurance coverage. Some home improvements may reduce the safety of your home, at least in the eyes of your insurer. Consider increasing your liability insurance if you're adding a new swimming pool or hot tub to protect yourself from potential lawsuits.

Which home improvement projects affect homeowners insurance?

Some home improvements will raise your home insurance premiums, while others may qualify you for discounts. Here are some of the most common home improvement projects, as well as how they may affect your homeowners insurance costs:

  • Home modifications and additions will raise the cost of rebuilding your home. To ensure that your home is completely covered, you will need to increase your replacement cost coverage.
  • Replacing your roof is the most cost-effective home improvement for lowering your insurance premiums because a new roof reduces the likelihood of a claim for hail damage or leaks. The material used to construct your roof may also have an impact on your homeowners insurance premium.
  • Kitchen upgrades may necessitate an increase in your replacement cost coverage, but this is dependent on the extent of the renovation. Installing new countertops and painting cabinets in your kitchen may not increase the cost of rebuilding your home sufficiently to warrant raising your insurance. Reworking the floor plan, replacing kitchen cabinets, and upgrading appliances, on the other hand, would necessitate a reevaluation of your home's replacement cost.

We recommend contacting your homeowners insurance provider to determine whether an increase in replacement cost coverage is required. A brand new kitchen may also necessitate updating electrical and plumbing systems in an older home, which may result in a discount.

  • Bathroom remodels are similar to kitchen renovations in that the upgrades determine whether you need to increase your insurance coverage. Keep in mind that additions such as a sauna or steam room can result in higher insurance premiums. These features can cause structural damage to your home in the form of mold or mildew, and they also necessitate higher liability limits due to the increased risk of injury.
  • Building a home office may not have a direct impact on your home's replacement value, but working from home may necessitate an insurance upgrade. Depending on the nature of your work, you should consider:
  •  Increasing your business property limits if you have electronics or other equipment that exceeds the limits of your standard coverage
  • If you are a freelancer, frequently work from home, or run a business that does not serve clients in person, consider adding home-based business coverage.
  • Self-employed homeowners typically require additional business insurance, such as a business owners policy.
  • Backyard improvements may necessitate an increase in replacement or personal property cost coverage, as well as liability insurance.

When it comes to adding a swimming pool, the type of pool you select is critical. Damage claims for in-ground swimming pools are uncommon because these pools are not susceptible to fire, water, or wind damage. Adding an in-ground swimming pool will raise your annual premium by about $50. Above-ground pools are typically considered personal property, so ensure that your personal property limits are sufficient to cover the cost of replacement.

Insurance companies classify swimming pools as an "attractive nuisance" because they pose a significant risk to homeowners and their visitors. To protect yourself from potential lawsuits, we recommend increasing your liability coverage.

Other backyard improvements, such as patios, gazebos, and outdoor kitchens, are less complicated. Make sure your new renovations are included in your replacement cost coverage so that if you have a claim, you can rebuild with the same finishes.

  • Hurricane-proofing your home if you live in a coastal area will usually result in a discount on your homeowners insurance policy.Homeowners who invest in hurricane shutters, storm windows, and roof hurricane ties save an average of $42 per year. More importantly, these enhancements make it less likely that homeowners will have to file claims following minor storms, which will help keep premiums low in the long run.

What insurance should my remodeling company have?

When getting home renovation estimates from contractors, make sure to request copies of their insurance policies. Professional contractors will have commercial liability insurance as well as workers' compensation policies in place.

They may also have a builder's risk insurance policy, also known as construction insurance, which protects your home from vandalism or theft while it is being built, as well as your renovation materials and tools.

You may need to purchase a builder's risk insurance policy if your contractor does not have one. The cost is typically 1% to 4% of the total budget of your project. This coverage is provided by a number of major insurance companies, including:

  • Hartford
  • AIG
  • Chubb
  • State Farm
  • Nationwide
  • Zurich
  • Liberty Mutual
  • Admiral Insurance Brokerage Corp.