Home Renovations and Insurance: What Every Homeowner Should Know

A home remodel is almost always an excellent venture to undertake considering it is meant to improve the value, comfort, and the overall look of your home.

However, amidst the chaos of choosing contractors, selecting materials, and managing budgets, homeowners often overlook a critical aspect: how those renovations affect their home insurance.

To that effect, here are some insurance implications of home renovations that any homeowner should consider before going all in.

1. Revising your Insurance Plan Is Necessary

When you decide to undertake renovations like constructing a new room or remodeling the kitchen, the price of the house in question is likely to rise. Such improvements are practical and, therefore, increase the property’s value.

As such, it would be wise to periodically review your homeowners insurance policy to make sure the new value of the property is reflected in the policy.

So, is reassessment of your property necessary once you have renovated it? Certainly! And here’s why.

Protection against Underinsurance: New changes in your property, for instance, having expanded or renovated your home may see you have inadequate insurance after a loss due to having an outdated policy.

Say your home started out costing $300, 000 and later got up to $400, 000 after renovations; your current policy would only pay you a meager $100,000 in the unfortunate event of total loss. A reassessment of your property ensures you are compensated fairly in the event of loss.

Replacement Cost Coverage: It is important to understand that home insurance generally means insurance for the amount to reconstruct or repair the house with similar kind and quality material to it.

Subsequently, the cost that will be incurred in either replacing or repairing these improvements is considerably higher than before.

It is always useful to update your policy in order to meet the requirements of a new construction with additional features and advances.

Avoiding Financial Hardship: This means that one is likely to shoulder a lot of expenses in case of a claim if they are underinsured.

This can be financially crippling, especially when major money was spent on the same in a bid to enhance the house’s appeal.

By reviewing and adjusting coverage, you will be in a position to avoid shocks or surprises concerning dollars.

2. Report Additions to Your Policy

Adding facilities such as a garage, swimming pool or deck may prove of immense value to the usability of a home. However, these additions also pose a risk in insurance that must be under taken so as to be covered fully.

Why is every new addition to your policy a big deal?

Coverage Gaps: It is important to note that new structures/and or addition may not be covered under the standard home insurance.

Failing to update your policy might mean that these things will not be covered in case they are lost or damaged and you will have to incur an extra cost.

Increased Risk and Liability: Some of the facilities that add to the value of a home such as swimming pools pose high risks and possible dangers that would make the landlord liable.

For instance, a swimming pool is associated with a high risk of drowning hence increasing the risk of many liability claims.

Appending these additions to your policy makes sure that you are under a sufficient measure of liability coverage for such dangers.

3. Consider Temporary Vacancy Clauses

In some cases you may need to leave your home at least for some time because of refurbishment. The general aspects of coverage of a vacant home are included in most home insurance policies through certain special provisions.

These clauses lessen the coverage on a home if it’s left uninhabited for 30- 60 days. The reasoning behind these clauses includes:

Increased Risk: Empty homes are at higher risk of being broken into, vandalized and having other sorts of problems that may go unnoticed for some time, such as leaking water or a fire.

Policy Exclusions: Most standard policies may either entirely omit or restrict coverage for perils on an owner’s property if the home is unoccupied for a time beyond a specified duration.

To ensure your home remains adequately protected during renovations, consider the following steps:

To ensure your home remains adequately protected during renovations, consider the following steps:

Discuss Plans with Your Insurer: It is important to communicate this process to your insurance company, particularly their understanding of your renovation schedule and the necessity to leave the house. They can inform their clients on the measures to be taken in order to guarantee coverage.

Obtain Vacancy Endorsements: Your insurer could provide a vacancy endorsement that will provide protection during the time that your house is empty. This will come in handy in filling any disjointed areas that may exist in the distribution of the material.

Consider Specialized Policies: In the case of long-term vacancies, you’ll probably require a permanency vacant house insurance policy which has elaborate coverage for uninhabited homes.

4. Any Contractor Hired Should Have Compensation and Liability Insurance

Liability coverage must first be checked from the contractor that you are considering hiring. The most important thing to keep in mind is that the contractor you enlist has liability insurance and worker’s compensation insurance at their workplace.

Why? Because this places you at a safe position to avoid being sued by people who get injured or their property damaged during the renovation processes. Furthermore, ensure the insurers are made aware of the work being undertaken and the contractors carrying out the work.

5. Premium Rates are Subject to Change Based on the Renovation

When undertaking a renovation, depending on the nature of the work to be done, the insurance premium may be affected. Expensive improvements and extensions generally increase the degree of exposure and reparations which often causes insurers to change your rates.

With that said, some of the repairs that improve the safety features of a premise like a new roof or a modern electrical system are capable of reducing your policies’ premiums.

6. Home Safety Improvements Can Lower Premium Rates

Usually, new premiums are not a result of all renovations. This may entail changes such as installing a security system, smoke detectors, or fire-resistant materials, which cuts the premium bill.

Letting your insurer know about these safety features may add up to the discounts and low premium rates.

7. Documentation and Record-Keeping Is Paramount

Ensure proper documentation or the renovations; this involves keeping records of the contracts, receipts, permits and even photos of the work being done.

This is not only useful in reflecting the latest policy in your home but is also vital in case there is a claim to be made.

Documentation guarantees that the improvements are recorded, thus receiving the right level of compensation that the renovations deserve.

Conclusion

Remodeling different parts of your home can change the feel and utility of your residence and add value to your property. Nevertheless, remodeling comes with insurance consequences.

Knowing changes slated for an insurance policy, its effect on coverage and premiums, and documentation can safeguard an asset and be satisfying.

As such, any changes should be discussed with the insurer before any alterations to the house are made to understand fully how the changes will affect the policy and coverage.