Have you watched HGTV and been inspired to take on your own home improvement projects? Regardless of whether you are doing the project yourself or hiring a contractor, you probably spent countless hours deciding on the specifics, picking out materials, and turning your vision into a reality. But once the project is complete and you are enjoying your renovated home, many homeowners forget a critical step…to notify their insurance advisor of the upgrades!
Your homeowners coverage is based on your home’s replacement cost. This is the cost to rebuild your home, replace your contents, and reestablish an equal standard of living. This is not the home’s market value. For more information about the difference between market value and rebuild cost, take a look at our blog on the topic.
Remodeling your kitchen, redoing your master bathroom, adding an addition to your home, finishing the basement. Renovations such as these add to your home’s resale value, but more immediately, they impact the replacement cost of your house. If you do not alert your insurance advisor to these changes, they will not be reflected in your replacement cost. As a result, your coverage will not be sufficient to completely rebuild the home. It can also void any extended or guaranteed replacement cost provisions provided by your policy.
Replacing your roof? Updating plumbing or wiring in an older home? These types of improvements can help make your home safer and less likely to be damaged, and therefore may also reduce your premium. Let your insurance advisor know when you make updates.
A few special situations to consider:
- Building a pool in your backyard will add to the home’s rebuild cost, and increase your liability risks. It is recommended you discuss this with your advisor before building to make sure you understand all the increased costs.
- Turning a spare room into a home office may bring up the question of business use. Be sure to consult with your insurance advisor to make sure all property in that room is properly covered as your homeowners policy may have exclusions for business use.
- If you are hiring a professional, make sure to check references and obtain certificates of insurance before they start working for you.
Regardless of renovations, it is a good practice to periodically review your policies to make sure your replacement cost is adequate to cover your home and possessions.
