How Remodeling Affects Your HomeOwners Insurance Policy

Remodeling is an exciting prospect to many homeowners. Replacing outdated appliances, carpet and kitchen cabinets or adding on a new room is part of making the house you live in reflect who you are as an individual. As you’re drawing up plans and selecting colors, however, don’t forget to take a look at your HomeOwners Insurance policy before you begin tearing out that dividing wall.

One of the benefits of remodeling is that it significantly increases the value of your home. Since at least 80 percent of your home’s value must be covered by your insurance policy, chances are you’ll need to increase the amount of coverage after your remodeling project. Also, make sure you inform your agent about the specifics of what has been changed. If a new room is not mentioned in your policy, it may not be covered in the event of damages. Don’t wait until after the project is finished to increase your coverage. If damage due to fire or other disaster occurs before the completion of the project, you’ll need to have the updated policy already in place in order to file a claim for replacement. If your project includes purchases of expensive equipment or appliances, make sure these are added to your personal possessions coverage as well.

Another benefit of remodeling is that it could bring you savings on your policy. If your project includes installing a sophisticated fire sprinkler system, burglar alarm, or other safety measure, your insurance company could give you a discount on your premiums. Notify them as soon as you begin the project in order to verify any potential savings.

If you hire a contractor to do the remodeling, make sure that he and everyone on his crew is covered by worker’s compensation and liability policies. The contractor should show you proof of insurance before he begins any work on your home. If his insurance is inadequate or nonexistent, you could be held liable for any injuries that occur to workers while on your property and for any damage that may occur as a result of the work he’s doing on your home, such as water damage that may occur during a rainstorm if he left an unfinished part of the house uncovered. Your insurance company may not cover damages for inadequately insured workers who are injured while doing a job on your property meaning you could be sued, which is why it’s vital that you verify the contractor’s coverage ahead of time.

If you’ll be doing the remodeling work yourself, look into what kind of coverage you have for injuries to people helping you. Friends or family members doing the work for free will be covered by your policy, but if you are paying someone to help you, you should purchase additional worker’s compensation insurance since you are in effect acting as the general contractor. If you hire subcontractors, they should provide their own proof of insurance before beginning work on your home.

Building supplies stored on your property should be covered by your insurance policy. You may want to check with your insurance agent to make sure you have sufficient coverage for these items should they be stolen or vandalized.  Also, be sure you check local building codes before you begin your project. If your remodeling is not up to code, it won’t be covered by your insurance company.

As many as 40% of homeowners who make improvements to their homes fail to adequately increase their insurance coverage to match the updates. If your insurance coverage still reflects a two bedroom, one bathroom home, but you’ve added an extra bedroom and bathroom, you could face significant unrecoverable losses in the event of fire or other damage. Even seemingly less expensive projects like adding a deck or replacing the kitchen cabinets can add much value to your home and should be reflected in your insurance policy. It’s important that you make the necessary changes at the time of construction; otherwise you could be caught unawares when disaster strikes. Adequate homeowners insurance will provide you with peace of mind and will enable you to truly enjoy the newest features of your home.

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