Remodeling your home can be a big expense and investment, so how does it affect your homeowners insurance? Through your insurance policy, you can still protect your home during a remodel, then help you save money and continue to protect your home and new renovation long after the remodeling process is over.
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How to Get Your Renovation Covered
Proper insurance coverage during a home renovation is essential before any remodeling can begin if you want to avoid paying unexpected coinsurance penalties if any issues arise. With a renovation crew in your house, there is an increased risk of injury on your property, chance of theft and vandalism, and a higher chance of damage and fire to your home. Under your usual homeowners insurance policy, renovations might not be covered if you are increasing the value of your home and the rebuilding cost pass your current limits.
Speak with your provider
The first thing you should do is notify an agent from your insurance company. During the renovation, your property might be underinsured as your home’s value increases, and you end up paying a coinsurance penalty if anything were to happen. It’s important to update your insurance agent to ensure that the limits on your home insurance policy are high enough to cover the increase in your home’s value and rebuilding cost.
Your insurance company must be notified if your renovation or new addition budget is more than 10% of your policy’s dwelling limit, costs $500,000 or the homeowners move out of the house for any length of time. Before any work is done to your home, tell your insurance agent about your renovation plans and ask if you should increase your coverage limits, possibly in increments as the renovation project progresses.
It might be necessary to add certain coverages that are specific to remodeling to your existing insurance policy to properly cover your renovation. Dwelling under renovation coverage protects your home by protecting your construction materials and covering you during foundation collapse. All building materials on your property and en route to your property are protected by dwelling under renovation coverage, allowing you to easily replace any construction materials that get damaged or stolen at any point during your renovation.
Vacant Home Insurance
Vacant home insurance can protect your home when it is unoccupied for more than 60 days during a renovation. Often used during major renovations where homeowners are living somewhere else, vacant home insurance will still protect your home from any damage or destruction while you are not living in the house, just like your typical homeowners insurance policy does.
Insurance From workers
Contractors insurance is something that your reputable contracting company should have if you’re hiring professionals to do the remodel. Review your contractor’s insurance policy to ensure that both of you are covered in case of an event. A reputable contractor should at least have liability insurance and workers compensation coverage. Always ask the contractor and any subcontractors to provide you with a certificate of insurance and make a copy of their proof of insurance.
If you are taking the DIY approach, doing the work yourself and not hiring a contractor, it is still important to check your liability coverage. With friends and family possibly helping you remodel your home it is still possible for someone to be injured on your property and file a lawsuit against you. Consider raising the amount of no-fault medical protection on your homeowners policy so that any medical bills can be directly submitted to your insurance company and lessen the chance of you being sued.
Update Your Homeowners Insurance Policy After a Renovation
Because renovations almost always add to the value of your home, you must update your existing homeowners insurance policy after your remodel. Ensure that you match your new coverage limits to the new, actual value of your home. Adding the cost of the renovation to your existing limit or setting your new limit at the remaining balance of your mortgage might not actually reflect your home’s true value and rebuilding cost. It’s important to update your coverage limits honestly to avoid being underinsured, denied a claim or dropped entirely by your insurance company.
How You Can Save Money After a Renovation
Despite the large investment, major safety improvements to a home could save insured homeowners up to 60% on their premiums. The biggest savings come from updating utilities, installing wind mitigation features, and updating building code standards after renovations are complete.
These discounts are given out by homeowners insurance companies to homeowners who make their homes safer. Customers who live in lower-risk homes are less likely to make a claim, so they are rewarded with lower insurance premiums. While discounts can be variable, savings can range from hundreds to thousands of dollars per year depending on the insurance company and state.