Are you remodeling your home? If so, there are a few things regarding your homeowner’s insurance that you should consider. Understanding homeowners insurance coverage can be tricky, so read on to learn more about this complex topic.
Understand the prep
You have likely saved up a small fortune for your home renovation. However, there’s a lot of prep that also goes into making this decision.
You can’t just knock a hole in the wall with a sledgehammer and call it a day. No, you must be strategic about your renovation.
Before calling a contractor, start by reevaluating your insurance needs, during and after the process.
Consider these tips
First, make sure to keep your home insurance agent informed about your plans to remodel your home. Your agent will be able to sort out the coverage you need over the next few weeks or months. They will also alert you if you need to change your policy.
You should also know who is responsible for all of the uninstalled appliances. This can include new heavy-duty items like an oven or fridge. However, you should also tell your insurance agent about other objects like cabinets and carpet flooring.
Consider getting a liability umbrella policy in case anyone gets hurt during the renovations. You should choose this policy if you are concerned about paying for a family’s medical bills in case of an emergency.
You should also check with the BBB, the Better Business Bureau, before hiring your contractor. You can check reviews and ensure that working with your chosen candidate will be well worth it. If they are not registered, this can land you in hot water when discussing your insurance policy.
Most policies require you to have at least 80% percent of your home’s replacement value insured. However, keep in mind that most full home renovation projects should increase your home’s value by 25%. Therefore, you will need to increase your coverage to align with the home’s new value.
The NAIC’s Recommendations
The National Association of Insurance Commissioners recommends that you should reexamine your policy whenever you get anything done to your home.
This includes the following projects. These can raise your insurance rates, but they can also add value if you’re looking to sell your home eventually.
Adding a home addition
Adding a home addition is a great way to add value to your home since you’re adding more square footage to the home. Your policy should increase to cover this new space. You’ll have to knock down residential drywall, and your premiums will have to reflect that. Your insurance company will typically come up with this rate by seeing what it would cost to rebuild your home after a natural disaster. They will then apply this rate to the new square footage addition to give you your new number.
One mistake you shouldn’t make? Never wait to tell your insurance agent to adjust your policy after the project has been completed.
You can’t predict accidents and emergencies. For example, let’s say you are about to wrap up construction when a fire breaks out! Everyone makes it out alright, however, your new addition has completely burnt down. You won’t have any coverage! Therefore, if you choose to build an addition to your home, ensure you give your agent a call as soon as possible. Perhaps, set an appointment to speak with your agent before even beginning the project.
This is the main concept when understanding homeowners insurance coverage.
Add coverage when adding a home office
Did you know that you will also have to adjust your homeowners insurance as well as your business insurance if you build an office in your home? There are certain requirements you must meet when using your home for business purposes.
Converting a space
However, there are other renovations that fall under this umbrella of new homeowner insurance. For example, if you want to add plumbing to an area, a garage, or a basement, you will be creating an unlivable space to a liveable space. You may not be adding an addition, but you will need to talk this over with your agent to adjust your policy.
Additionally, if the area was not covered beforehand, you will need to make changes to your policy.
If you are converting a space like a garage, this may also affect your auto policy. You will now be likely parking your car on the concrete driveway.
If you are using this new space to house tenets, you will also have to look into landlord insurance to cover your bases.
You will have to do this extra step, even if a family member is renting the space from you.
Changing up current rooms
Even if you are not adding any extra rooms. Renovating certain areas could also increase your insurance rates as you are adding more value to the property.
For example, these next few renovations will count and must be evaluated by an agent.
Bathroom Remodel
A bathroom remodel can also increase your home’s value. This can be true if you install a new bathtub, toilet, or add new tile. Fixing the plumbing can also add value.
Kitchen Remodel
A kitchen remodel can also add value to your property. Renovations will not include fixing a clogged drain. However, this can include other projects like replacing countertops, replacing floors, or making room for new appliances. You can also add more value by painting the walls, regrouting the floors, and extending the area. Adding doors or knocking down walls to create a more beautiful space can also enhance the space, so talk this over with your insurance agent before starting any projects. Remember, accidents can happen when you’re wrapping up construction, so it’s always better to be cautious when it comes to selecting the best insurance plan for your home, and your family. This is something you should keep in mind when understanding homeowners insurance coverage.
Garage door repair
If you want to switch your garage door out for a new one, this can also add more value to your property.
This is also something you should consider when you want to convert your garage into a room. You want the room to be well-insulated and if your garage door is busted and broken down, this can be nearly impossible. Therefore, look into purchasing a new door or look into garage door repair for your current door. Investing in a new door may also cause your policy to change, which is why it is important for you to grasp this when understanding homeowners insurance coverage.
Bedroom remodel
Of course, adding to your kitchen and bathrooms can add value to the home. But there is another way you can add value. When understanding homeowners insurance coverage, try to renovate the bedrooms too. This can increase your resale value in the future, but keep in mind that it will also increase the insurance policy. You can do simple renovations like painting the walls or purchasing new furniture. However, adding to these rooms is a good move!
Rebuilding after a disaster
However, what if you don’t fit any of these boxes? What if you don’t want to add on to your property? What if you don’t want to convert an unlivable space into a livable one? What if you follow into the following category. Let’s say your home was hit by a devastating storm. Rebuilding also warrants a meeting with your agent. This is a part of understanding homeowners insurance coverage. Why?
You are likely to raise the rate for the next homeowner when you rebuild. Also, since your home has been attacked before, your house is also considered at risk. This can cause your insurance to go back up since you already made a claim. In insurance, every claim you make translates to a new risk. The more claims you make, the riskier your property is deemed.
However, don’t be hesitant when filing your claim. This is meant to keep you safe in case of another devastating accidnt or natural disaster.
Pool add-on
Here’s another fact you must know when understanding homeowners insurance coverage.
Adding a pool can cause your insurance to also rise. You may not have experienced a disaster. You may not have added on another room to your home or converted a garage. However, since pools add value to your home, you will need to take up this improvement project with your insurance agent.
However, pools also come with a lot of maintenance so ensure you have a power tool repair service on standby if you wish to improve your property in this way. In case something breaks, you want to ensure you have the right resources and tools to fix it. Otherwise, you will be paying more in insurance rates for absolutely no reason!
You will also need construction insurance
When understanding homeowners insurance, you will also need to understand this following separation. Construction insurance is not the same as home insurance. They are separate, but you will need both when starting a huge project on your property. Let’s say you want to do some roofing work. If you are hiring various contractors to get this project done, ensure you take this step! You don’t want anyone getting hurt and sent to the hospital. You can be responsible for paying those bills if you don’t protect yourself or your employees.
Construction insurance will also cover you in case someone steals from you. When you have various people you don’t know coming into the property; you also want to be protected in this sense too!
You may end up paying more in insurance when buying an umbrella policy like this one; however, if someone is injured or something of value is stolen when you’re not observing the home, you will be glad that you took the chance.
Understanding homeowners insurance coverage when you want to save money
Here’s another thing you must know when understanding homeowners insurance coverage when you want to save money. All of these projects may cost more when you are adding value to your home. But the good news is there is a way for you to save money on your current policy with a few renovations.
Start by adding a few safety features to your home. This makes your home ‘less risky’ from an insurance standpoint. You can add a smoke detector or a carbon monoxide monitor. A full camera security system is another way you can potentially knock down the cost of your insurance policy.
You can also replace the HVAC system. Outdated furnaces are a huge red flag for insurance companies. They are unstable and can honestly put you in danger. Therefore, invest in a new unit as soon as possible. Then, speak to your agent about potentially lowering the cost of your insurance policy if you wish to understand homeowners insurance coverage better.
They can answer all of your questions when it comes to reducing and raising rates.
Conclusion on understanding homeowners insurance coverage
In conclusion, understanding homeowners insurance coverage doesn’t have to be difficult!
Home renovations and home insurance go hand in hand. You should always speak with your insurance company before even thinking about the home improvement process!
