Find out how to insure your home improvement or remodeling project including the risks associated with the work being done as well as the final results.
Planning to remodel or make new additions to your home? Is it a large fixer upper project? Or something smaller, like a new bathroom?
Is it a do it yourself project? Or will you be hiring a contractor for the work?
The planning process for your home improvement project is complicated. There will be lots of questions and tough decisions to make.
It’s easy to get caught up in the vision of the finished product. However, before that can happen, several essential planning steps must occur. These will help ensure the finished product matches your vision.
The type of project will determine how much your home will increase in value. Remodeling a whole home in the US results in an average increase of $28,904. Smaller jobs like a bathroom remodel adds, on average, $4,316.
Regardless of the project, you’re making a large investment into your home. As such, you’ll need proper insurance coverage to protect that investment.
Insuring your project goes beyond just insuring the final product. You’ll need to protect the planning and construction as well.
Connecting with your insurance agent beforehand to go over the plans will make sure that you’re protected throughout the project.
For a larger remodeling, hiring a contractor is the way to go. They have knowledge and access to skilled labor to complete your dream project.
Before hiring a contractor, it’s important to check their certifications. Do your homework to ensure they’re licensed and bonded.
Go to your state’s labor and industries department to confirm your contractor’s licensing status. Ask to see their insurance policy.
In some cases it’s okay to go directly to their insurance provider for documentation. It’s in your best interest to review your contractor’s insurance with your insurance agent.
Upon review of the contractor’s coverage, your agent might recommend additional coverage. These are the three types of coverage your contractor should have in their insurance policy:
General liability insurance covers negligence on the contractor's part for personal injury or property damage. If injury occurs or property damage is caused on the job site, your contractor assumes liability for damages.
In the event that an employee or subcontractor is injured on the job site, workers comp will cover medical costs and paying lost wages. If your contractor didn’t have this coverage, you could be liable to pay compensation costs to the injured worker.
Covers damage to the home and building materials. If new granite countertops are installed and one gets cracked, your contractor assumes liability for the damaged materials.
Say your new bathroom with plumbing fixtures is completed. One month later, a pipe breaks and floods your bathroom. Builders risk coverage protects you from the resulting damage.
Another important aspect of insuring the remodeling project is regularly scheduled inspections. The most important inspection is the initial one by your local zoning board.
Your local municipality might have specific laws related to building projects as well. If you don’t get approval through a local zoning board, this could void your insurance coverage.
Regular inspections during the project will prevent damage due to faulty workmanship. Having a Completed Operations Coverage policy holds your contractor accountable for repairs stemming from any faulty workmanship.
DIY projects are appealing because of cost savings compared to hiring a contractor. However, DIY projects come with inherent risks.
Labor costs for a project with a contractor will be higher than a DIY project. Though, the contractor’s insurance removes significant risk from the project.
The savings gained by doing it yourself, will be spent on additional insurance coverage. If you decide not to purchase this insurance, you’ll take on all the risk. Before undertaking a DIY project, we suggest meeting with your insurance agent to discuss your needs.
Another option is to simply do it yourself online: Click here to compare quotes from top home insurance companies.
Hiring workers? Then we suggest purchasing additional personal liability coverage. This will reduce your liability should any of them suffer injuries.
A typical homeowner’s policy has a minimum of $100,000 worth of personal liability coverage. Depending on several factors, your agent may recommend additional personal liability coverage up to $250,000.
Keep in mind with DIY projects, you and your workers will be liable for any defects in, or damage to, building materials. Whereas a contractor is covered by Builders Risk insurance coverage.
You might want to seek out additional coverage on your building materials. For instance, let’s say you damage new granite countertops.
And you purchased replacement value coverage. Then you’ll be able to purchase new countertops and no additional cost.
Meet with an insurance agent throughout the entire project. This will go a long way toward ensuring proper coverage at all stages. Before and during the project, appropriate coverage keeps your workers safe.
After completion, there are additional coverage considerations. Increasing the square footage of your home should increase the value of your home. You’ll want to increase your insurance coverage to account for this increase.
It’s important to cover the valuation gap. And place additional coverage on the improved items themselves.
We recommend getting replacement value coverage on new appliances, plumbing fixtures, flooring, etc. This will protect them at their original value and not at their cash value. Cash value accounts for depreciation and will provide less than the amount to replace.
Certain additions may require more personal liability coverage after the project is complete. Projects like decks, pools, hot tubs, and play sets, warrant additional personal liability. There’s an inherent risk of injury when using them.
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