Home Renovations? You May Need to Make Changes to Your Insurance

Young couple working together on a home remodel project.

Image source: Getty Images

Any homeowners considering an upgrade needs to know how it could affect their insurance coverage.

Key points

  • Many homeowners will renovate or upgrade their property at some point in their lives.
  • This can affect home insurance costs.
  • Sometimes, insurance will cost less, while in other circumstances homeowners may need more coverage.

Every property owner needs the right homeowners insurance policy. Homes are a valuable asset, and having the right protection in place can protect property owners from catastrophic financial loss if a covered disaster occurs.

Sometimes, homeowners will buy insurance coverage and then decide to make upgrades or renovations to their homes. In these circumstances, it’s important to modify home insurance coverage as needed.

Here’s why homeowners should let their insurers know ASAP if changes are made to their property.

Home upgrades or renovations can change premium costs

Homeowners should alert their insurer to upgrades and renovations made to their home. In some cases, the changes they make to their property could affect their insurance premiums favorably.

Say, for example, a homeowner puts a new roof on the property or upgrades to hurricane-resistant windows. Either of these upgrades could reduce the risk of losses occurring. As a result, they may entitle the property owner to discounts on their home insurance premiums.

There’s little reason to pay more than necessary for adequate coverage, so it’s worth reporting all upgrades to an insurer to avoid unnecessarily expensive premiums when a home renovation makes insurance cost less.

Upgrades or renovations could also necessitate a change in coverage

In other circumstances, a home renovation or remodel could necessitate a change in coverage in order to make sure the homeowner is still fully protected from loss.

Say, for example, a homeowner makes the kind of major changes that increase how much their home would cost to rebuild. Or they might add to the home in such a way that increases the value of the dwelling. Under these circumstances, the homeowner may need to upgrade the maximum amount of coverage they have for their property.

If a homeowner doesn’t act after renovations that add to the value — and add to the replacement cost — of their home, their coverage limits may be too low. The insurer wouldn’t be aware the home is now worth more, and the policy limits would be based on the pre-renovation value. If the property was destroyed, homeowners wouldn’t be able to rebuild and restore it back to its current quality if they hadn’t added additional coverage under these circumstances.

Likewise, a homeowner could make changes that necessitate more liability coverage. If they add a pool or an outbuilding, for example, this could create an additional hazard so they may need to pay more for their liability protection or raise their liability coverage limits.

Don’t be afraid of reporting changes

Adding additional coverage usually means that premiums go up. While this can be disappointing and some homeowners may not want to report changes if they fear their insurance costs will rise, it’s still important to alert insurers to the upgrades and make any necessary changes to a policy. It’s far better to pay slightly higher premiums to have the right coverage in place than to not report the renovations and end up with major out-of-pocket losses if something goes wrong.

For all of these reasons, any homeowner who makes changes to their home should contact their insurance company ASAP. Failing to do so could be a huge financial mistake that comes back to haunt them in the end.

Choosing the right homeowners insurance to protect you

No matter where you live, insuring your home is critical to protecting your finances in the event of an unexpected incident. Whether it’s a natural disaster, an accident, a break-in or something that causes damage to your property, you want to know you have the right homeowners insurance coverage for your situation.

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