How will home remodeling or renovations affect your homeowners insurance?
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If you're looking to make any structural changes to your home, it's important to consider how this will impact your homeowners insurance and what steps you need to take to ensure adequate insurance coverage for both the remodeling process and the completed additions. Depending on the scope of your project, you can expect the value of your home to change following your remodel, so your homeowners insurance will need to be updated to account for any changes and additions.
If a guest falls off your new balcony, but you never let your insurer know about the addition, the insurer will likely deny your claim. They may even cancel your policy or issue a non-renewal for failing to report the change. It's in your best interest to keep your insurance company abreast of your remodeling or renovation plans — in this regard, you can never be too transparent in case something goes wrong.
So before you knock down that wall, consider these steps before you embark on your remodeling project.
Most home insurance policies require you to carry enough insurance for at least 80% of its replacement value, so make sure to confirm the value of your home before the remodel. Call your insurance company to confirm your coverage and let them know about any additions or home improvements you're planning to make and inquire whether it will be necessary to increase your coverage limit. Ask if your coverage extends to building materials, and if not, consider adding an endorsement — if those materials are damaged, destroyed, or stolen, your insurance company will not replace them if you hadn't expanded your coverage. Ensure your coverage won't be exempted if you won't be occupying your home while it's being remodeled. It may also be a good idea to increase your liability coverage in case someone injures themselves on your property during the project.
Take "before" pictures of the space you're planning to renovate or remodel and keep it for your records. Account for any furniture or personal belongings that may need to be put in storage during the project, and make sure they're still covered under your homeowners policy if they're stored away from your home.
The contractor you choose should carry adequate insurance to cover themselves and their employees — the risks are far greater when your home is being remodeled, with workers likely using dangerous tools like blowtorches and saws, and generally being exposed to sources of potential injuries — like falling off the roof and being around sharp or heavy objects. Combine that with increased foot traffic and your home possibly being unoccupied during the renovation, leaving it vulnerable to potential vandalism and theft.
Ask for proof of insurance in the form of a "certificate of coverage" — this should include liability insurance and workers compensation. The contractor's liability insurance is meant to cover any damage to your property while it's under construction. Though your homeowners insurance should cover potential incidents during the remodel, your insurer will expect your contractor's liability insurance to pay out for the damage since they expect your contractor to carry their own insurance. Workers compensation is meant to cover any injuries the contractor and their employees may sustain while working on the project in your home. If they don't carry this important coverage or it's insufficient to cover their injuries, the employee may sue you for liability.
Luckily, the hard part is over if you've already discussed your home remodeling plans with your insurance company. Once complete, recalculate the new value of your home with your insurer and increase your coverage as needed to cover at least 80% of its replacement cost. Take some "after" pictures of your new addition or space for your records in case your insurance company needs to refer to them. If you furnish your remodeled space with new furniture or other belongings, don't forget to expand the home contents portion of your homeowners policy to cover those additions.
If you have friends or family helping during your do-it-yourself home improvement endeavor, the liability coverage in your homeowners policy should cover any potential injuries or incidents. It may be prudent to confirm what your liability insurance covers and what the coverage limit is in case of any accidents.