How Home Renovations Can Increase Your Premiums
Have you been thinking about modernizing your home? Maybe adding that in-ground pool you’ve always wanted? Or turning your bedroom into the master suite of your dreams? It all sounds nice in theory, but the reality of renovating sometimes isn’t so rosy. In fact, many times home renovations can mean headaches and higher home insurance premiums.
First things first, if you are having home revamps done, contact your home insurance provider before construction begins. This way, your restoration will be protected throughout the process.
So, why do renovations cause an upsurge in your home insurance premium? Because home renovations do at least one of three things – make things larger, better or riskier.
That’s right, many times home renovations increase your home’s square footage. Increased square footage means that the replacement cost of your home goes up, which might make your premium rise. What happens if you don’t notify your insurer of your new addition? Then it will not be covered in the event the additional space is damaged or experiences a total loss during a covered event such as fire.
One type of addition may raise your home insurance more than others – a home office. Besides the extra square footage, a home office could require you to purchase additional insurance. For example, if you’re running a home-based business out of that office, you could need business insurance to make sure you have liability coverage for it and to protect your computer, printer, and other office equipment.
Upgrades are another element of home renovations that can drive up home insurance premiums. If you remodel you kitchen, you’ll likely be adding brand new appliances and upgraded fixtures. These new items can increase the overall value of the contents inside your home by thousands of dollars, which means you might need more insurance coverage.
Contents coverage is the area of standard home insurance that protects all of your possessions. It includes things like electronics, appliances, clothing, etc. This coverage has limits and if the value of your home’s contents goes over these limits, you’ll be in trouble in the event of a loss. To ensure this doesn’t happen to you, keep an active home inventory and inform your insurer if you need to purchase additional coverage.
Some home makeovers spell out “high risk” to insurers. Swimming pools fall under this category. Why? According to the Consumer Product Safety Commission, an average of 5,100 pool- or spa-related injuries in children younger than 15 were treated in hospital emergency departments for 2010 through 2012. During the same time period, 390 pool- or spa-related deaths were reported. Translation: swimming pools are pretty dangerous. The increased liability risk means you could be paying a higher premium.
Even if you aren’t getting a pool installed, your home renovation still comes with risk. Simply having workers and subcontractors on your property increases liability risk. You’ll have people in your home climbing ladders, using power tools and putting themselves in dozens of other dangerous positions. Make sure you ask your contractor for proof of insurance; otherwise you might need to increase the limits of the liability portion of your homeowners policy – or hire a different contractor.
Make no mistake: Home renovations aren’t all bad. They can increase the resale value of your home and improve your quality of life. Nonetheless, make sure you’ve covered all your home insurance bases and considered the risk that’s involved before jumping in.