When you renovate or remodel your home, your home insurance premium can rise or fall. Replacing a roof, putting in a new kitchen countertop or a new shower in the bathroom can increase the value of your home. While this is great for your equity, it also means you may need to increase your home insurance limits to protect it properly.
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What's the difference between renovations and remodeling?
While it may seem like the terms "renovation" and "remodeling" are synonymous, there are some differences between the two that can affect your homeowners insurance rates differently.
To keep it simple: Renovation maintains your home's current value. Remodeling increases your home's current value.
Home insurance premium changes after a renovation or remodel
Renovations and remodels will affect your home insurance rates differently. Renovations affect your homeowners insurance cost from a preventative standpoint, saving you money over time, while remodeling is more likely to lead to an increase in your rates.
Renovation and home insurance
If you're repairing or updating a room of the house without changing the purpose of the room, that's a renovation. Examples of this are installing new flooring, repainting or replacing a wall, or switching out an old faucet.
While a home renovation may increase your home's value and require you to increase your
policy limit in order to make sure that you have proper coverage, this is usually a savings move. If the renovations include replacing an aged electrical or plumbing system, you are far less likely to need to file a home insurance claim. A lower risk often means lower rates in the eyes of home insurance providers.
Furthermore, your rates will probably increase after filing a claim. A claim can stay on your insurance history for five to seven years. Over time, that increased amount could add up to more than your claim amount. The best way to save money on a repair claim is not to have to make it in the first place.
Your roof can be the biggest renovation job you face as a homeowner. A roof replacement can cost tens of thousands of dollars. Furthermore, home insurers tend to take your roof very seriously, as it is the main protector of the whole house. Your rates can see changes depending on the type of roofing material you use:
- Asphalt: A very common roofing material due to its affordability and relative durability. You normally don't see asphalt roofs leading to a rate increase unless it's old or poorly maintained.
- Slate: Highly durable, but also very expensive. Going with slate usually means higher insurance rates.
- Tile: Long-lasting, durable and low maintenance. Unfortunately, it is also very expensive. You'll probably see a rate increase with a tile roof.
- Wood shake: While aesthetically pleasing, wood shake is the most flammable of roof material options. You will pay a higher home insurance rate for the higher risk, and some insurers may refuse to cover it altogether.
- Metal: Home insurers love metal roofing. It's long-lasting, low-cost, resistant to fire and rot and handles most extreme weather. You probably will not see a rate increase going with metal roofing.
Remodeling and home insurance
When remodeling, there are many factors that can affect your home insurance premium. If you're adding on a new room, or expanding an old one, or if you're adding on a deck or patio, the new square footage results in a dwelling coverage increase. This will raise your rates.
Adding something like a swimming pool or a hot tub can also lead to a need for more liability coverage. Pools especially are considered "attractive nuisances" by home insurance companies, as they present a high risk for children in your neighborhood. Some providers will not cover pools at all.
If you're doing an upgrade to the kitchen or bathroom with expensive materials, you can wind up seeing an increase in your rates. If you're going from formica countertops to slate, the cost difference can lead to a dwelling coverage increase that you'll have to pay for. The same goes for new flooring, fixtures and any new built-in appliances that are part of the remodel.
If you're not happy with the rate increase your insurer quotes you, take the opportunity to compare quotes from multiple home insurance providers to see if you can find a company more in line with what you're looking to pay.
Discussing your home improvements with your insurance company
It is highly advised that you discuss your renovation or remodel project with your home insurer before the work actually starts. You will want to have the proper coverage in place, just in case the work is damaged or destroyed before you can cover it later.
Coverage for the building materials involved in the project won't be your personal insurance issue. If you're using a licensed contractor, their builders risk insurance should cover the materials in the event of theft or damage. Make sure your contractor can provide proof of insurance before you hire them for the project.
You should also take before and after pictures of the renovation or remodel for your home insurance company. This may speed up any claims project you may need to make.
Having the correct home insurance coverage for a remodel or renovation is all part of homeownership, but it doesn't have to be difficult. Talk to your home insurance provider before starting the job. They'll be able to make sure you get the correct coverage, as well as explain how the project affects your policy.
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