Homeowners insurance protects property and assets from damage and unexpected disasters. Since the coverage homeowners need is based partly on the value of the home and its assets, renovations can affect the cost of policies as well as the coverage types and limits that homeowners need to maintain full protection.
However, while significant home renovations warrant an update to homeowners insurance, the rate doesn’t necessarily have to go up. This guide to insurance updates goes into more detail about when and how to update insurance after a renovation and how to change or even increase coverage without increasing premiums.
Why Do Renovations Affect Homeowners Insurance?
Home renovations impact insurance policies differently depending on the specific project. A renovation that expands the usable square footage, for example, can change the home’s value. Other upgrades to consider include the following:
- Adding a swimming pool or other detached structure, which may require its own policy rider
- Upgrading electrical or plumbing systems, which can change the home’s risk profile or value
- Adding luxury fixtures or finishes, such as in a kitchen remodel, which may increase the cost of rebuilding the home in the event of a disaster
- Using a remodel to add significant value to personal belongings, which may impact the policy limits on personal property coverage
- Adding smart upgrades or energy efficiency upgrades, such as solar panels or security systems, which can impact coverage premiums
However, as essential as it is for homeowners to recognize when renovations will impact their policy requirements, it’s equally significant to recognize when they will not. For example, minor renovations such as replacing carpeting or flooring or doing minor landscaping around the property will most likely not impact insurance.
The main thing to ask when wondering whether a renovation warrants an insurance update is: does the renovation change the home’s value and/or update its risk profile?
Does Homeowners Insurance Always Go Up After a Renovation?
Some homeowners can actually lower their monthly insurance premiums with strategic renovations. While adding property value and asset value through new rooms, luxury fixtures, or additional structures can increase premiums by increasing repair and replacement costs, some upgrades help homeowners take their insurance costs in the other direction.
For example, a renovation that replaces outdated plumbing or wiring may not significantly increase the home’s value, but it may reduce its risk assessment. In the eyes of insurance companies, this means the home is a safer investment, which can lead to lower premiums. Other improvements that can lower premiums include security upgrades, storm shutters, handrails, and other safety features.
Even adding a new roof or AC, while increasing the home’s value, also makes the home a safer investment in the event of a storm. There’s a reason why many insurance companies deny policies on new home purchases if the roof is too old. The age of essential structures affects the home’s risk profile, which in turn influences premiums.
When Should Insurance Be Updated?
Many homeowners make the mistake of waiting until renovations are complete to assess their homeowners insurance plans. However, to prevent coverage gaps that may impact claims on their new additions, homeowners should assess the risk factors of their renovations and enact insurance coverage changes as soon as possible.
This approach begins with the insurance planning stage, during which homeowners should consider their upgrades in light of the home’s value and the insurance carrier’s potential risk assessment. The insurer should be notified as soon as possible that the renovations are being planned so they can reassess the home.
However, notification is not enough; homeowners must also document the renovation process. Keeping detailed records of receipts, permits, and contracts, as well as photographic evidence of the home’s condition, can help homeowners make sure their insurance accurately reflects their planned improvements.
When communicating with insurance companies about planned or ongoing renovations, homeowners should keep track of these documents:
- Cost estimates
- Work descriptions
- Work permits
- Contracts
- Before and after photos
- Risk evaluations
Organized documentation saves time and prevents insurance claim issues down the road.
The Additional Risks of Home Renovations
Most homeowners think of home renovations in terms of their finished state, but the process itself can introduce risks that should be accounted for in their insurance plans. For example, temporary extra coverage can protect homeowners from damage related to the construction process.
Why is this needed? In the fine print of most homeowners insurance policies, insurers limit the coverage for damage related to construction. The expectation is that in such an event, the contractor’s insurance would pay. However, this is not always the case, leaving some homeowners to pay for costly mistakes after an accident or mistake damages the home or property.
Builder’s risk coverage is a separate, temporary policy that protects the home during renovations. It includes temporary risks such as construction-related fires, accidental property damage, or property theft.
Update Homeowners Insurance Today with the Help of Local Financial Experts
At Pro Insurance Group, our team recognizes that home renovations are stressful and costly. Our goal is not to increase homeowners’ logistical burdens but to relieve them. Our team will assess your situation, conduct an honest risk profile, and determine if additional insurance premiums are needed. If the renovations improve your home’s risk or safety profile, we may even be able to find insurance savings as a result of your new project.
Contact our experienced team today to learn when and how to update your homeowners insurance to make sure your home is protected before, during, and after the renovations.