Did you know your home and finances are at risk when you plan a home renovation project?
One of the main reasons homeowners fail to inform their insurance agent about home renovation plans is the assumption doing so will result in insurance premium increases. While this may be true in some cases, it could be even more costly if your agent is not a part of the planning process.
1. You could save money on your insurance.
Fixing your roof or upgrading your electrical system can decrease your insurance premiums. These types of upgrades and renovations lower your home’s risk of loss from the perspective of an insurance company, which could reward you in turn.
2. Your agent cannot protect what they don’t know about.
If you spend $20,000 on a kitchen renovation and don’t report the changes to your insurance agent, your home and finances could be at risk. Let’s say you’re cooking on your new Viking Range stove and the kitchen catches fire— your kitchen could be covered but if the fire extends to the rest of your home, you could be underinsured because the kitchen expense has increased the overall replacement cost value of your home. Your agent will encourage you to insure your home based on how much it would cost to replace it—which is different from the market and tax assessment value of your home. Call your agent and take a cooking class!
3. Insurance agents scare away the boogeyman (shady contractors).
Your agent can be a resource when it comes to choosing a general contractor to do home renovations. If you have a contractor in mind, your agent will likely advise you to ask for proof of insurance for workers compensation and liability coverages. Ask your friends and family members to refer you to trusted local contractor as well. Home renovations are a major investment, which makes it worthwhile to spend a little more on a contractor who has the proper insurance.
4. Insurance coverage during renovations can be very complex.
Asking a general contractor for credentials may seem pretty simple, and you may have done enough research to know you should ask. But your agent could spot other issues you may not think about right off the bat. If your contractor has insurance coverage, your agent may want to verify the amount of insurance in order to keep you safe. Workers who are injured in your home can sue you or claim damages from you if the contractor they work for does not have adequate coverage. By default, your homeowners and umbrella liability policies can become an injured workers’ insurance coverage—an unwelcome development for those who pay the premiums and do the claims paperwork.
5. Your home and personal property could be at risk.
The outcome of your renovation may be beautiful, but when you renovate your home, you expose yourself to risks like fires, construction accidents and especially theft. According to RealtyTimes.com, “If you have to vacate your home during the renovation process, your home becomes a target for thieves.” More important, your coverage can be reduced, perhaps significantly, while your home is under renovation. Speak with your agent to see determine the best course of action.
Your agent may advise you to consider temporarily increasing homeowners and/or umbrella policy limits or changing your deductible until you complete the renovation process. Plus, the renovated or expanded space in your home may fill up with new furniture, exercise equipment, electronics and appliances. Track those purchases with receipts and a written or electronic home inventory, and don’t forget to check the coverage in your homeowners policy for personal property.
6. Your exposures may have changed.
Are you finally finishing the basement to run your home-based business? Will you be renting out a portion of your home to create another stream of income? If you’re changing the way you use your home and don’t let your insurance agent know, these upgrades and renovations may not be covered at all.
Anything that changes your home, especially its structure or usage, can change your insurance coverage. Make sure you consult with your agent during your renovation planning process.