According to Harvard University’s Leading Indicator of Remodeling Activity, Americans will spend $427 billion on home improvement spending this coming July through September. That’s a 20% increase over the same period last year. And it’s the highest rate of increase in decades.
But while homeowners are reviewing floor plans and picking paint colors, most are forgetting an essential step: having a conversation with their insurance agent.
Why should you include your insurance agent in your home improvement plans?
- Home renovations can increase your home’s value, making your current home insurance coverage inadequate and leaving you vulnerable to losses.
- Some improvements can help you qualify for lower premiums.
Here are five home renovations that could potentially affect your home insurance policy
Getting a New Roof
Installing a new roof can save you money. With a new roof, you don’t have to worry about expensive roof repairs or leaks. In addition, a new roof can help cut your home insurance costs by 10-20%. The roof is the single most significant factor that can affect your policy. Most insurance companies will offer a significant discount if you use stronger roofing materials that are leak, hail, and wind resistant. Before installing a new roof, ask your insurance agent if you qualify for a discount. A new roof could also increase your property value, meaning that you may need more coverage.
Wondering if solar panels are worth it? Check out this solar panel cost/benefit analysis from our Chief Investment Officer, Bob Weisse.
Building a Pool
Building a pool will make your home popular in the summer. But it also makes it the riskiest on the block. When people are having fun and running around the pool, accidents can happen. If a person does get hurt, they could hold you responsible for any damages. This risk increases your need for personal liability protection. That’s why your insurance premium will drastically increase after installing a pool. Some insurers will ask you to install a self-locking fence around the pool to reduce risk and, accordingly, the cost of insuring the pool. Your homeowners insurance coverage amount will also increase to compensate for the value of the pool.
Wondering how much personal liability insurance you need? Check out these resources:
How Much Umbrella Insurance Do I Need?
Minimizing Personal Risk and Liability to Protect Your Wealth (Podcast)
Personal Liability Protection Tips
Expanding the Living Space
As your family grows, your home needs to grow with it. One way to add living space is to finish the basement or convert the garage into livable space. You can also build an addition, which will increase the square footage of your home. In this instance, your insurance should be updated to account for the value of the new space. If you plan on renting out the new space, you will also need landlord coverage.
Renovating the Kitchen and Bathroom
Most homeowners will start with the kitchen and bathroom when they want to upgrade their home. Buyers dream about chef’s kitchens and spa-like bathrooms in the master suite. What some homeowners may not realize is that these upgrades can meaningfully increase their home’s value. If you install high-quality countertops, new appliances, and new flooring, ensure that your insurance coverage is revised accordingly so you have sufficient coverage in case of an accident. You can also ask your insurance agent if you qualify for a discount if you have upgraded the plumbing and electrical wiring. These upgrades reduce the chance of flooding and fires, hence reducing your premium.
Don’t forget to document the cost of renovations. Capital improvements to your home can increase the property’s cost basis. If you sell the property, a higher cost basis means lower capital gains tax. Use our Capital Improvements Worksheet to help you identify and track your capital improvement costs.
Adding a Deck
A deck can be the social hub of your home, especially in summer. But having one installed can also affect your insurance policy. Adding a deck can increase your home’s value, and it can also increase risk, especially if it is attached to the second story. Therefore, you should have your insurance policy revised after adding a deck, to reflect the increase to your property value and to ensure that it sufficiently covers potential losses in case of an accident. When your property value goes up, so must your coverage, meaning that you have to pay higher premiums.
The Bottom Line on Renovations
If you are considering having some work done on your home, talk to your insurance agent first to help you understand how the renovations might affect your insurance policy. Your agent will help you make the most of your discounts while still ensuring that your home is adequately insured.
