When you first insure your house, your coverage and premium can depend on a wide range of factors, including the overall condition of your property and the presence of certain features. So, it makes sense that home insurance and renovations can be closely connected. The changes you make to your house could ultimately impact the cost of your homeowners insurance.
However, not all renovations are created equal. Some upgrades will increase your premium, while others will actually save you money. Still others may cause your insurer to drop you. Exploring common renovation options and how they’ll impact your rate will help you successfully navigate the world of insurance and home improvements.
Setting the Foundation: The Intersection of Home Renovations and Insurance
So, does insurance cover renovations? And how exactly will the changes you make to your house impact your policy? Before you bust out the construction equipment and start taking on projects homeowners can tackle themselves, make sure you understand the basics how renovations can influence your homeowners insurance.
Understanding the Basics of Home Insurance Coverage
There are plenty of things first-time buyers should know about insurance, including how renovating their property can impact their policy. If you’re wondering how renovations affect home insurance, it’s important to start by exploring how property coverage works. The cost of your policy is calculated based on several characteristics. That includes the value of your house and the overall risk of making a claim.
For example, if your house has outdated safety features or decaying structural elements, you might be more likely to incur damages and make a claim. If you have a high-value home that would be more expensive to replace or repair, you could also have a higher premium due to the potential cost of a claim payout.
The Ripple Effect of Home Improvements on Insurance
Because risk and value influence the cost of your homeowners coverage, changing certain elements of your house could have an impact on your rate. For example, if you do something to make your house safer, you could unlock a lower monthly premium. On the flip side, many renovations will increase the value of your house, leading to higher coverage costs.
Because renovations impact coverage costs you’ll need to contact your provider about your upgrades to make sure your new plan covers the changes. If you don’t update your policy, it might not fully cover the replacement or repair cost of your new upgrades.
When Upgrades Mean Uptick in Premiums
Investing in your property may seem like a no-brainer, but it’s important to understand which upgrades could potentially raise your expenses. As a rule of thumb, upgrades that are expensive to repair are more likely to increase your premiums. Additionally, renovations that increase the risk of a claim will also lead to a higher rate or outright cancellation.
Roof Renewal: Safety vs. Cost Concerns
Many insurers will adjust your premium based on the age of your roof and its replacement cost. Roof replacements are covered by homeowners insurance when they are damaged due to a covered event. Replacing an old roof will make your house safer and decrease the chance of roof-related damage, which could help you access a lower rate. If you upgrade your roof materials to something more durable, you could potentially save even more.
Luxury Upgrades: Kitchen and Bathroom Remodels
Adding luxury finishes to your kitchen, bathroom, and other spaces can make your home more attractive and increase its market value. However, you might also need to increase your dwelling coverage to ensure your policy will cover all of these upgrades if they need to be repaired or replaced. For example, replacing granite countertops or custom shelving will require more coverage than rebuilding standard finishings.
Risky Add-Ons: Pools, Fireplaces, and More
Certain structures and features simultaneously increase the value of your property and the risk of making a claim, making them high-ticket items when it comes to your homeowners coverage. Pools, for example, can be a popular luxury addition. They’re also expensive to maintain and repair, along with increasing your liability risk due to the potential drowning and injury hazard. Fireplaces are another example, as they can increase your fire risk.
More Room to Cover: Extensions or Additional Structures
When you expand your house, you’re increasing the amount of space that needs to be covered. As a result, building an addition, a guest home, or even a deck can increase the valuation of your property, causing your rate to go up. Because you’ll need more protection to cover your primary home and the new add-on, you’ll want to increase your payout limit to ensure you’re fully covered.
Savvy Investments That Can Decrease Your Rates
So, which renovations should you consider if you want to save on your coverage? These upgrades could actually end up saving you a pretty penny in the long run.
Security Systems and Storm Preparations: A Safe Bet
Adding safety and security upgrades is a surefire way to decrease your risk in the eyes of insurers. Storm-safe windows, hurricane straps, and other reinforcements can protect your house during intense storms, reducing the cost of potential repairs for your insurance provider. Security features, such as alarm systems, can also help you secure a better rate.
Energy Efficiency and Green Upgrades for Long-Term Savings
Your wiring and plumbing can affect both the efficiency and safety of your house. Upgrading your house systems to be more modern and energy-efficient can save you money on your utilities and on your home premium. Certain upgrades, such as solar panels, may cause your rate to go up because of their repair and replacement costs; however, the amount you save on energy costs can often offset this increase, making them a worthwhile long-term investment.
Modernization and Technology Advancements That Save
Smart home technology, such as advanced smoke detectors or water leak sensors, can mitigate risks and alert you to problems before they escalate. Many insurance providers offer discounts for these tech-savvy updates.
Avoiding Pitfalls: Insurance Must-Knows Before You Build
Ready to start renovating? Keep these considerations in mind before you start planning.
Navigating Policy Adjustments with Renovation Projects
When you renovate your home, you’ll likely have to go through the policy adjustment process. Your insurer may need to reassess your property or expand your coverage to ensure you have the right protection. To streamline the process, save any paperwork related to your renovation, such as invoices from contractors, to provide evidence of your upgrades.
The Consequences of Skipping Permits and Insurance Notifications
It’s important to proactively communicate with your insurer about your renovations and get the right permits. If you end up needing to make a claim but your plan is only designed to cover your pre-renovation home, you could end up paying out of pocket. In some scenarios, undisclosed renovations or upgrades that aren’t up to code could even void your policy completely.
Special Cases: High-Value Upgrades and Unique Situations
Home renovation policy adjustments aren’t a one-size-fits-all situation. Certain high-value upgrades, such as kitchen and bathroom renovations or custom work, could have factors that both increase and decrease your premium. It’s important to communicate openly with your insurer and compare your monthly premium costs to the long-term value of your home when considering any high-value renovation plan.
Insuring Remodels of Kitchens and Bathrooms
Kitchens and bathrooms are two of the most valuable areas in your home, so upgrading them can significantly impact your insurance. A kitchen remodel, for example, may necessitate increased coverage to protect high-end appliances, countertops, and custom cabinetry.
Custom Features and Their Impact on Your Insurance Plan
Custom features like skylights, wine cellars, or intricate woodworking may require special coverage. These unique additions can sometimes fall outside of the typical coverage, so make sure your policy accounts for their value.
The Post-Renovation To-Do List: Updating Your Insurance
Once you complete your renovation, you’ll want to make sure that every aspect of your new policy is in order. The following are a few guidelines to follow.
Reassessing Your Coverage Limits Post-Renovation
Depending on your upgrade, you may need to take a few different steps to adjust your coverage. For small updates, you might just need to submit documentation and inquire about an increase in coverage limits. For others, the insurer might request a complete reappraisal to get an accurate understanding of your home’s new market value.
Checking Compliance and Ensuring Adequate Protection
Any time you make a significant update to your house, you’ll need to make sure it’s up to code. If your home isn’t compliant with construction and safety codes, that could lead to liability issues that impact your coverage. Get your property inspected and submit any documentation to your insurer to cover all your bases.
Make Sure Your New Plans Are Covered
Being able to customize and upgrade your house is one of the most exciting parts of being a homeowner. However, you want to ensure you can afford an insurance plan covering all of these upgrades. By considering home insurance during renovations and factoring potential premium changes into your renovation budget, you can avoid any extra surprises in the renovation process. You can even adjust your renovation with added safety features and modern updates that offset your risk level, helping you build your dream house while still keeping your insurance rates within budget.
If you’re thinking about making your house your own with custom renovations, you need a custom insurance plan to match. At Freeway, you can find affordable homeowners insurance for your renovation and beyond. To prepare for your renovation with the right plan, visit a Freeway Insurance office near you, get an online quote, or call 800-777-5620 to talk to a knowledgeable agent about your options.
