How Home Renovations Affect Your Homeowners Insurance

One of the best ways to build equity and increase the value of your home is to do some home renovations. Adding new features, repairing the roof, or replacing the siding can not only make your home a nicer place to live but can add a lot of value to your home, should you ever decide to sell.

There is a downside, however: not all renovations are created equal, and some of them can raise your insurance premiums, making for more of a short-term loss. There are also some renovation projects that can lower your insurance premiums.

Does Homeowners Insurance Cover Renovations?

Typically, a standard homeowners insurance policy doesn’t cover renovations. It will continue to protect you from other events such as fire, theft, and weather damage that happen during the renovation, but if something happens because of those renovations, your basic homeowner’s insurance policy won’t cover that.

It’s always a good idea to talk to your insurer before undergoing any home renovations, especially major ones like making an addition to the house. You may want to consider taking out specialized home renovation insurance specifically for the project, especially if it’s going to have a major short-term impact on your living situation. Your insurer may also be able to advise you on whether you need additional insurance coverage to account for the new additions to the home.

Renovations That Can Increase Your Homeowners Insurance

Now let’s look at some of the home renovations that can make your insurance premiums higher:

Home additions such as new rooms, a second floor, etc. will increase the property’s replacement value for insurers, so they will pass that additional risk on to you in the form of higher premiums. There’s nothing devious at work there — they, like you, want to make sure your improved home has all the coverage it needs.

Another improvement that can raise your premiums: building a swimming pool. This not only adds value to the property but also represents a higher liability risk for insurers should somebody slip and fall while running around the pool or crack their head on the diving board. In some cases, your insurer might not even provide coverage if you have a diving board! You can mitigate these expenses somewhat by adding a locking fence or other safety measures around the pool.

Adding an office for a home business: More and more people are working at home these days and having a home office means having more assets in your house — computers, office equipment, and other expensive assets. You’ll need to buy extra coverage for those assets.

Finally, upgrading your kitchen or bath can be a major asset to your equity and the value of your property, especially if you shell out for high-quality building materials. As with the other entries on this list, this translates to needing more coverage to replace or repair those areas should something happen to damage them, which means higher premiums. If you don’t get enough coverage, you could end up paying out of pocket for repairs.

Home Renovations That Can Lower Your Homeowners Insurance Premium

Now for some better news. Not every addition to your home will raise your premiums. Here are a few that may bring those premiums down:

Repairing or repairing your roof probably means your premiums will have to be recalculated based on the increased value of the home, but a lot of insurers will offer a discount if you have a brand-new roof. A brand-new roof is less of an insurance risk, because it doesn’t have the potential for leaks or other catastrophic damage an older roof does.

You can also bring your insurance prices down by storm-proofing your home. Installing storm shutters, reinforcing garage doors, and taking other measures to make your home more weather-resistant can lead to discounts, especially if you live in an area where hurricanes or tornadoes are common. Why does this bring premiums down? Simple: the more resistant a house is to damage, the less the repair cost should something happen.

Upgrading your electrical wiring and plumbing can also have a positive effect on your homeowner’s insurance premiums, for basically the same reason: old wiring and plumbing are more prone to mishaps and disasters than their newer counterparts, so newer components are less of a financial risk for insurers.

Finally, you can take a chunk out of your premiums by installing home security devices, such as security cameras, home alarm systems, automated lights, and more. Theft is just as much of a risk to insurers as natural disasters, particularly if you live in a place that’s prone to crime. The more security you have around your home, the less likely you are to get robbed, and the less likely the insurer will have to pay out a claim.

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