Generally, your standard homeowners’ insurance policy will cover renovations also referred to as home improvements. However, you will always want to check with your insurance agent before starting the project to ensure that you are covered adequately. There are reasons why we advise you do this:
- Home improvements increase the rebuilding costs of a home, leaving you underinsured in the end.
- You may have a limit on your existing liability, or it may not be sufficient if someone ends up getting hurt during the improvement(s) project.
The best way to explain this is with an example. Assume you have $300,000 dwelling coverage. That is around what the insurer will pay you to rebuild the home for all the loss minus your deductible. If you undertake extensive renovations of your kitchen, use excellent quality materials, and maybe add another few square footages, the rebuilding costs will go up by maybe 10%, which means $330,000.
Will My Insurance Premiums Go Up If I Renovate My Home?
In a nutshell, and based on the example above, home improvements could cause your home insurance premiums to go rise, but that may not always be the case.
Projects that raise the value of a home will eventually mean paying higher premiums. If you add a room to the home, regardless of whether it is a second suite or a bedroom, that will increase the living space and thus your insurance bill. That’s because the total square footage will bump up the costs.
Similarly, renovations that end up with the installation of expensive materials like marble in your bathroom or high-grade appliances in the kitchen will add to rebuilding costs, which means higher premiums.
Even though many home improvements may raise your premiums, specific improvements could have an opposing effect. For instance, if you replace the roof with something sturdier or maybe you install shatter-resistant window panes, these will likely decrease your premiums. That’s because it makes your home more resistant to storms and damage. Depending on what you install during the home improvement project, it is possible you could end up with a discount. Improvements like installing smoke detectors, burglar alarms, and deadbolt locks will all lead to a decrease in home insurance premiums.
If the goal is to spend on home improvements that decrease your premiums, contact your insurance agent for advice. Your insurance agent should be able to provide a list of all the possible additions which lower premiums.
Regardless of what types of renovations you decide to undertake, the existing coverage limits could be too low to match the home’s post-renovations liability. That’s why speaking with your agent is essential to ensure that the costs are covered and if what you have planned will raise premiums. After which, you can decide if renovations are something you want to invest in or if it is better to hold back for later when the higher premiums are acceptable.