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Home Renovations and Your Insurance – Are You Covered?


Renovation insurance

Whether you’re making a few upgrades or adding a whole new room, you’re probably thinking good thoughts when it comes to your home renovation – like how great everything is going to look or how much fun you’re going to have showing off your new room to all of your friends.  You’re probably not thinking about things like fires, tornadoes, floods, and hurricanes. Unfortunately, all of those positive thoughts may end up costing you big time in the end! That’s because anytime you change the value of your home, it can affect your homeowners’ insurance.  After all, your monthly premiums are based on what it would cost to repair or replace your home and the things inside of it.  If you make any changes to those things, it can have a major effect on your insurance policy and what you’re entitled to in the event of a loss. So, what do you need to know when it comes to home renovations and your insurance?

-  The change in premiums isn’t always dramatic
Let’s say you have a garage that’s kind of yucky, and you want to knock it down and replace it with a nicer garage.  In that case, your premiums shouldn’t change too much.  You’ll still have to let your insurance company know, though, because you’re making changes that are affecting the overall value of your house.

-  The difference in payouts can be dramatic
Let’s say you convert your attic into a fifth bedroom.  If you don’t tell your insurance company about it – and suffer a fire that destroys your house two months later – they’re not going to pay you for that extra bedroom.  Instead, they’re going to pay you what your house was worth before the attic was renovated.  After all, you were only paying premiums on a four bedroom house, so to them, that’s all your house was worth!  They’re not going to care that you just spent $50,000 turning your attic into a bedroom because you didn’t tell them about it.

-  You might actually wind up saving money
Never thought you’d hear that, did you?!  It’s true, though – some renovations will actually lower your premiums.  For example, if you add a security system to your home, your insurance company will view your home as being less of a risk for being burglarized.  As a result, you’ll get to pay lower premiums. Or, if you’re replacing that ancient electrical system with a newer one, your insurance company may consider your home less of a fire risk – and reward you with lower premiums. The same goes for a new roof.  If it has been 20 years since you had any roof work done and now you’re getting everything replaced, you’re at less of a risk for developing leaks (something the insurance company would have to pay for if a storm hit).  As a result, you’ll probably get to pay less in premiums every month.

-  Your insurance company needs to hear the news from you
Ultimately, it’s up to you to let your insurance company know what’s going on.  Just because your home passed an inspection doesn’t mean the inspector is going to tell your insurance company about it.  Or, just because you took out a second mortgage to pay for the renovations doesn’t mean they told your insurance company about the changes.

-  When in doubt, ask
There are plenty of home renovation projects that won’t have the slightest effect on your homeowner’s insurance.  However, it’s always better to be safe rather than sorry.  If you’re not sure if your renovation is going to affect your coverage and/or premiums, simply call up your insurance company and ask them.

Bottom line -- better you pay a little more in premiums now than risk not being covered and pay a whole lot more later!

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