Insurance needs when you're renovating your home

What your standard home insurance policy will cover + what add-ons to consider

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Courtney Washington

Courtney Washington is a Texas A&M University graduate. She worked as a licensed agent for AAA for more than two years. Her extensive knowledge a…

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Ross Martin

Insurance Writer

  • 4+ years in the Insurance Industry

Ross joined The Zebra as a writer and researcher in 2019. He specializes in writing insurance content to help shoppers make informed decisions.

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Susan Meyer

Senior Editorial Manager

  • Licensed Insurance Agent — Property and Casualty

Susan is a licensed insurance agent and has worked as a writer and editor for over 10 years across a number of industries. She has worked at The Zebr…

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Preparing for home improvement

Home renovations have blown up in the last few years. According to the Joint Center for Housing Studies at Harvard University, home improvement and repairs spending increased to $432 billion at the end of 2021, up more than 28% from the previous year.[1]

It makes sense. If the COVID-19 pandemic did anything for people, it caused us to sit and consider our space. People were spending more time at home and needing to adapt their homes in many cases for remote work. Also, there was a jump in home buying and new owners wanting to renovate their new house to make it their own.

If you’re planning to undergo a major renovation, here’s what you need to know about how it might affect your homeowners insurance coverage, coverage limits and the value of your home.

Does a home renovation affect my homeowners insurance?

Whether a renovation affects a homeowners insurance policy depends on the renovation project, and the time the project will take to complete. Technically, replacing old carpet with fresh carpet is a home renovation project. However, the project can be completed quickly, and swapping carpet for carpet typically keeps the rebuild price the same.

That said, homeowners should reach out to their insurance provider before starting large projects to see if they need to adjust their policy. Adding rooms, bringing in building materials or making extensive upgrades can increase the replacement cost (or price of rebuilding the home). If you increase your replacement cost without increasing the cost of the policy, you are underinsured. Additionally, projects that cause you as the homeowner to leave the house vacant for more than 30 days require a different insurance policy than the standard homeowner's policy. 

It's worth remembering that your personal property coverage protects the belongings inside your home, including furniture and large appliances. If something is damaged during the course of the renovation, this coverage can help.

Should I contact my insurance company if I want to do renovations on my home?

Smaller projects might not require the homeowner to update the insurance company. However, if a loss occurs during a home renovation, the insurance company can charge an additional fee to cover it or deny the claim outright.

Check with your insurance company before starting any renovation projects to see if you need additional coverage. Let them know what you plan to change and the approximate timeline for the project. They’ll be able to tell you if you’ll need to increase your coverage to include any new materials or appliances you install.

Some companies offer special add-on policies called dwellings under renovation coverage. This is different from normal dwelling coverage. Think of it was home renovation insurance. These policies are designed to protect your structure as the construction changes take place. An insurance agent will be able to advise you if you need to purchase one of these policies to protect your structure and materials while the project is underway.

What do I need to think about when hiring a contractor for renovations?

Homeowners should hire a contractor for any changes to the home's structure. Because they do large projects professionally, contractors and subcontractors know which permits and other vital information they'll need to make the job go as smoothly and efficiently as possible. 

It’s important for you to be aware of your contractor’s insurance policy. Before signing the contract, ensure that your contractor has:

  • Worker's compensation insurance, and 
  • General liability coverage

In most cases, the contractor’s insurance is primary, and the homeowner's policy is secondary if there's an incident on the job site. Without those items in place, the homeowner could be sued for any damages and injuries that occur while the home is under construction. 

Am I covered if I DIY my home renovation projects?

DIY projects can be a lot of fun. And homeowners are generally protected under the rules of their home insurance policy. You could also have friends and family over to help with the more labor-intensive portions and turn it into a party. 

However, accidents happen. Before doing any major DIY remodeling projects, ensure your liability and medical payments coverage is up to date and you have adequate insurance coverage

 DIY paint

Liability coverage and medical payments are two aspects of a homeowners policy that the homeowner sets when they set up the policy. Liability insurance protects the homeowner by paying for a lawyer and covering a lawsuit payout if someone was injured on their property and sues for compensation. The coverage amount usually ranges from $100,000 to $500,000. Medical payments go to the injured party to pay their medical bills. The coverage amount usually ranges from $1,000 to $5,000. 

For more significant projects, homeowners might consider adding an umbrella policy to their homeowners insurance cover. Umbrella policies are affordable, usually between $10 and $50 for the year. But they add extra liability protection to their buyers. Coverage for these types of insurance starts at $1,000,000 and can go as high as $5,000,000+, depending on the company. This means that if a policyholder has $500,000 in coverage for their home policy, they could have a total of $1,500,000 in coverage by adding an umbrella policy. Note that most companies will require you to meet a higher threshold for your liability coverage in order to enact an umbrella policy. 

Do I need permits to renovate my home?

You’ll need permits for any jobs involving:

  • Moving or adding rooms
  • Adding outbuildings like sheds, decks or garages
  • Plumbing work
  • Electrical work

Every municipality or city has its standards when it comes to building codes. Therefore, any time you alter the structure, electrical work or plumbing of the home, you should check with the city to make sure the results of your project abide by their rules. 

Draw up plans for major projects and present them to the city for permits before starting the project. Say a homeowner jumps into a home reno project without securing the proper permits. The city could halt the project in the middle of construction. If the project is completed and the city realizes that they don’t have records for it,  they could require the homeowner to demolish the un-permitted parts of the building. 

Either of these options would be a waste of money, time and resources. Permits can seem like a hassle, but they make sure any alterations to buildings are safe. 

Can my coverage remain the same if I'm not living in my home during the renovations?

If the home is vacant for longer than 30 days, the homeowner needs to secure vacant home insurance.

The vacant home policy protects a house similarly to traditional home insurance coverage. They cover theft, vandalism, fire, lightning, wind and hail. But the separate vacant home coverage accounts for the difference in risk between an occupied home and an empty home. If a fire broke out in an occupied home, the homeowners could put out the fire before it caused too much damage. In a vacant home, the same fire could cause much more damage before anyone realized it was there. 

Homeowners can customize some policies to fit their needs. They can indicate whether the home will be under construction during that period. They can also extend coverage to the materials, workers and part of the building that's under construction. 

How can renovations help my insurance costs?

Renovations involving a new roof, new plumbing, or new electrical work can translate into a discount on a homeowners policy. Insurance companies love home renovations because the building is up to code using new materials. New materials and code adherence lower the chance of the home insurance company paying out for a fire or any other type of claim. 

If you’re considering a home improvement project whether it’s new countertops or something big like a swimming pool or adding square footage, your standard homeowners insurance policy might not be enough. Make sure to check with your company and consider shopping around for home insurance quotes to make sure you have the best rates.

Home insurance discounts

Depending on the company, a new roof and new plumbing or electrical work discounts can be anywhere from 10%-45%+ off of a homeowners policy.