Home Renovation Insurance: What You Need to Know

Remodeling your home? Don’t forget to update your insurance policy.
Sarah Schlichter
By Sarah Schlichter 
Edited by Caitlin Constantine

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Finishing your basement, adding a sunroom or upgrading to your dream kitchen can make a big impact on your quality of life at home. But these types of remodeling projects can also affect your insurance needs, potentially leaving you underinsured.

If you’re considering making changes to your home — or if you already have — it’s smart to revisit your homeowners policy. Here’s what you should know about home renovation insurance.

Tell your insurer about your renovation

Reach out to your agent or insurance company before making expensive changes to your home. They can clarify your policy’s current limits and advise whether you might need to adjust your coverage.

For example, your dwelling coverage limit is based on how much it would cost to rebuild your home if it were destroyed. Because major improvements generally raise your home’s replacement cost, you may need to raise your dwelling coverage limit as well.

Adding a fence or a new shed? These fall under your other structures coverage, which might need an increase. And if you’re buying a bunch of furniture for an addition or high-end electronics for a new home theater, consider raising your personal property limit to make sure they’re fully covered.

Finally, you may want to increase your personal liability coverage limit if you’re adding a swimming pool; the chance of injury or drowning in your pool could make you a potential target for lawsuits.

Your agent or insurer can help you estimate how much your premium will go up to reflect your new coverage limits. If it’s a significant price hike, you may want to shop around for home insurance quotes from other companies.

Avoid home renovation insurance pitfalls

On top of ensuring coverage, a proactive conversation with your agent could help you avoid potential renovation pitfalls. For example, your agent may advise adding ordinance or law coverage. This insurance protects you from having to pay out of pocket to keep your home compliant with local building codes.

For renovation projects that are too big to take on yourself, hire a licensed and bonded contractor who carries builder’s risk coverage. This insurance covers expensive construction materials for theft or damage while they’re on your property. You can find a licensed contractor through a building trade association.

You’ll also want to ask whether your contractor has workers’ compensation insurance to pay for medical expenses if someone gets injured while working on your home. Without this insurance, the worker could potentially file a lawsuit against you. Make sure the contractor’s insurance also applies to any subcontractors — or, if it doesn’t, that they have their own coverage.

And when you’re doing a home renovation project, take plenty of photos — before, after and along the way, if you’re able. These could come in handy if you file a claim and need to redo the work.

Make an inventory of your property

It’s smart to create a home inventory once a year to make sure you have enough coverage for your personal belongings. Consider doing an inventory right after your renovation, when you’ve still got receipts for any major purchases.

You can use a home inventory app or take your phone from room to room, capturing video of everything you own. Focus on the most valuable items, and don’t forget to open drawers and closets to show what’s inside.

This process will help you choose the right personal property coverage limit and can pay off if you need to file a claim. An inventory will clearly show what you had before a disaster and make the claims process easier.

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