Should I Tell My Home Insurance Agent If I Renovate My Home?

The amount of homeowners insurance you purchase relies on criteria such as the size, condition, and price to rebuild your home in the event of a calamity. However, what if these variables alter, such as if you add a deck or renovate the kitchen? Does home insurance cover home improvements? If you are planning a remodel or remodeling, here is what you need to know about house insurance coverage.

Standard homeowner's insurance coverage typically covers remodeling. Nonetheless, it is prudent to check with your agent prior to beginning the project to ensure that you will be sufficiently protected during and after the restoration. There are two primary reasons for the significance of this:

• You could be underinsured if a renovation increases the cost of reconstructing your home.
• If someone is injured during the renovation, your existing liability limits may not be adequate.

Here is an illustration. Assume your home's dwelling coverage is $200,000. After your deductible, this is the amount your insurance company would pay toward reconstructing your home in the event of a covered loss. Suppose you renovate your kitchen extensively, using higher-quality materials and adding square footage to your home. With the kitchen renovation, your reconstruction expenses have increased to $240,000.

Take pictures before, during, and after remodeling to have a visual record of the work. Additionally, be careful to retain copies of all contracts and receipts.

Suppose you adjust your coverage limits in accordance with the higher rebuilding costs. In that case, you will be sufficiently protected in the event of a disaster. However, if you do not update your coverage, you may find yourself hopelessly underinsured. In this scenario, your coverage would only cover $200,000 of the $240,000 rebuilding costs, leaving you responsible for the remaining $80,000.

Regardless of the type of modifications you perform, your existing coverage limits may not be sufficient to cover the increased value and liability of your house. Always consult your insurance agent prior to construction to determine if your current policy will provide adequate coverage during and after the remodeling. If not, revise your policy prior to beginning work.