By Samantha Alexander for HomeInsurance.com
Does your house need an update? Breathe new life into your property – and boost its value – with a home renovation. Whether you decide to gut the house for an all-in renovation or to make just a few changes to the basic model, don’t rush to turn your home into a construction site without considering it fully.
According to the U.S. Census Bureau, Americans spent more than $300 billion dollars on home improvements from 2012 to 2013. With all that money being spent, homeowners should be smart about protecting their renovation investment. Your home insurance policy helps with that, but you need to be vigilant as well.
Renovations and your home insurance policy
If you are having work done to your house, chances are it could affect your current home insurance policy. Before your contractor starts knocking down walls, you should call your home insurance provider to discuss the impending renovation.
Working with your provider ahead of time will ensure that your investment is protected throughout the process. The three main coverage areas that can be affected by a renovation are personal liability, dwelling and contents coverage.
Liability
Standard home insurance policies typically offer liability coverage. This coverage protects you in the even someone is injured on your property. During a home renovation, your house basically becomes a construction site, which means the risk of injury goes way up. Your home insurance policy’s liability coverage can be as little as $100,000 – that may not be enough to protect you if something goes wrong.
Most contractors carry their own general liability coverage. This will come into play if the contractor suffers an accident or makes an error that causes damage to your property. A responsible contractor will also carry workers compensation coverage in case an employee is injured on the project.
However, don’t just assume that your contractor has insurance. You should ask your contractor to produce proof of both of these coverages before work begins on your home. If you don’t, you could end up being held responsible for medical costs and more. Even if the contractor has adequate coverage, it might not be a bad idea for you to bump up your liability protection during the project.
Dwelling
If your home renovation project includes increasing the square footage of your house, you may wind up needing more dwelling coverage. What’s dwelling coverage? It’s the part of your home insurance policy that protects the physical structure of your home from certain perils, including fire, wind, hail and more. Your dwelling coverage limit is likely set at the amount of money it would require to rebuild your house should it be destroyed by a covered peril.
The added value of your renovation means that your home will now likely cost more money to rebuild, which means you may need to up your coverage limits. Call your home insurance provider to check the limits currently listed on your policy.
If you know the new square footage for your home, you can use a dwelling coverage calculator to get an estimate of your home’s new value. This calculator uses your ZIP code and works by multiplying the square footage of your home by local construction costs.
Contents
Beyond square footage, you may also be adding expensive new furniture or appliances to complete your home renovation. These items would be protected under your home’s contents coverage; however, your contents coverage likely has limits. Expensive items may spill over those limits, meaning you would need to increase your coverage to protect your new items. Contact your home insurance provider to get the lowdown on your contents coverage limits.
A good way to keep track of your personal items is by keeping an active home inventory. A home inventory lists all of your possessions along with their value. This list will help you keep track of the items in your home, which could come in handy if you ever need to file a claim. Photos and receipts are helpful as well.
Risky renovations
Some home renovations can actually add risk to your property. Exhibit A? Swimming pools. Sure, swimming pools seem like a nice idea but they are a major liability risk. From 2010 through 2012, an average of 5,100 pool- or spa-related injuries each year involving children younger than 15 that required treatment in hospital emergency rooms, according to the Consumer Product Safety Commission. From 2008 through 2010, 390 pool- or spa-related deaths were reported annually.
Those death and injury stats might make you think twice about installing a pool. On top of that, homeowners with swimming pools typically pay much higher home insurance premiums because of the added liability.
Another risk that can come with a home renovation project? Doing the project yourself. Sure, TV shows make DIY projects look simple. But some things are better left to the professionals. Tackling a DIY home renovation can put your own safety at risk, in addition to the safety of others.
Do your research
From checking out contractors reviews to reviewing your home insurance policy with your insurer, take time to do your research before starting a home renovation. A little bit of leg work upfront will give you peace of mind that your investment is protected both during and after the project.
Samantha Alexander writes for HomeInsurance.com, an online resource for homeowners and drivers across the country. Offering comparative automobile and home insurance quotes, consumers rely on HomeInsurance.com for the most competitive rates from the top-rated insurance carriers in the country. The HomeInsurance.com blog provides fresh tips and advice on a range of financial topics to help homeowners and homebuyers make educated decisions about their insurance purchases.
