5 Common Renovations That Can Impact Home Insurance Premiums
Home renovations can add major value to your home — experts estimate that some improvements cost only about 20 to 25 cents on the dollar, with the other 75 to 80 cents going back to the home in the form of increased value. But it’s also important to keep in mind that some home projects could present higher liability risks, and thus increase your homeowners insurance premium (in part because of the need for higher coverage limits).
It’s critical to speak with your insurer about planned home improvement projects before you start making changes to your home. This will help ensure the renovations and upgrades you make are covered by your policy, and have sufficient financial protection should they ever need repair or replacement due to a covered incident like fire, theft, or windstorm damage.
Below are 5 common home projects that could impact your homeowners insurance rates.
- Upgrading your roof
Renovating your roof is one of the most significant upgrades you can make, adding both market value and additional protection to your home. Since the condition of your roof is the source of many snow, rain, wind, and hail claims, homeowners insurance companies often offer money-saving discounts if you replace your roof and install weather-resistant roofing materials.
Furthermore, an intact roof can help protect you against a whole host of hazards, and in turn, reduce your chances of having to make a homeowners insurance claim. Fewer claims translate to lower insurance rates, and most home insurers also offer claim-free discounts.
- Kitchen and bathroom upgrades
Upgrading your home’s appliances and features not only looks great, but it also can significantly increase the value of your place. On top of that, newer appliances, toilets, shower heads, and sinks are often more efficient than their older counterparts, ultimately saving you money in the long run.
But with that increased value comes the need for higher homeowners insurance coverage limits. If your home ever suffers damage from a fire, windstorm, or theft, you’re going to want sufficient financial protection so you can repair or replace your belongings. Your insurance agent can help walk you through your policy details and answer any questions you may have — and be sure to ask about available discounts for upgrading your home’s appliances and features to more environmentally friendly ones.
- Turning a room into a home office
Say you run your own business from home and want reliable coverage for your work-related materials and belongings. Some insurance companies offer endorsements on your homeowners policy that provide financial protection for your home business — but coverage limits are often capped at a maximum determined by the insurer.
Depending on the nature of your business, you may need to purchase a separate policy specifically designed to cover the homeowner’s business use. If you have clients coming to your home, for example, you’d need adequate liability coverage in case you’re sued by an injured guest. Be sure to speak with your home insurer if you’re considering a home office renovation.
- Putting in a pool
Sure, a swimming pool is aesthetically pleasing and can majorly increase the fun factor of your backyard — but it’s important to factor in the liability that pools pose, too. It’s a good idea to speak with your home insurer about building a swimming pool on your property, since you may need to increase your coverage limits to adequately protect your increased liability. Higher limits often mean higher rates.
The good news is, if a guest is injured during a pool party at your place, your homeowners policy will typically step in to help pay for any medical bills you’re responsible for. But remember, the more claims you make with your insurance company, the higher your homeowners premiums will generally be.
- Adding more living space
Whether you’re converting your basement into a guest bedroom or building out your home to make room for a nursery, it’s key to inform your insurance company before you begin any major projects. Should disaster strike in the middle of your renovations, you’ll want to have high enough coverage limits to pay for repairs to your new space.
Yes, increased limits typically equal higher insurance premiums — but the difference pales in comparison to the amount you’d have to pay if a fire destroyed your project three-quarters of the way through, for example.
What’s more, adding square footage to your home generally increases its value. Make sure your homeowners insurance coverages are sufficient enough to fully financially protect your additions in the event of catastrophe, including the furniture, appliances, electronics, and other features and belongings that may be inside.
About the Author
Jeffrey Ill is the Vice President of Product at Esurance, where he leads the homeowners insurance program. A 33-year veteran of the insurance business, he has held numerous leadership roles at major insurance companies and has been involved in a wide array of product implementations.