When you decide to renovate your home you may not consider the impact on your Rhode Island homeowner’s insurance. Improving your home or adding space can increase both value and risk.
If you’re contemplating renovations or you’re doing them now, it is important you talk to your insurance agent. Otherwise, you may not have sufficient coverage. Here are 7 ways home renovations can impact your homeowner’s insurance.
Increased Square Footage
Anything you do to your home that changes the structure or how you use the space in your home can impact your insurance. For instance, you may decide to finish your basement in order to add an additional bedroom or bathroom. This increases your home’s living area and, because of this, you may need additional coverage to protect you if a loss occurs.
Increased Overall Value
When you tear out your old kitchen and install a modern one with upgraded appliances, granite countertops, and slate floor tiles, you’re increasing the overall value of your home. Your existing policy limits may not include these additional materials or the work to restore your kitchen should you experience a major loss.
Some home renovations increase risk, such as installing a pool or finishing your basement, so you’ll need additional coverage. Pools attract children who can injure themselves on your property, which could result in a lawsuit and costly medical expenses.
Finishing a basement increases the need for coverage should the basement flood. Remedying water damage is time-consuming and expensive, particularly if it causes mold and mildew issues.
Used for Home Business
Most homeowner’s insurance policies cover the equipment for a home-based business to some degree, but it may not be sufficient if you use specialized equipment, store many supplies, or stock inventory. Most times, your insurer can add a rider endorsement to existing policy. However, a home-based business with plenty of foot traffic may need a separate policy to address potential liability issues.
You Renovate to Rent
Some homeowners renovate so they can rent out their home, or part of it, to generate revenue. Even if you decide to rent out an office for a business or create a space for a salon, or convert a basement into a rented apartment, insurers consider renters higher risk than owner-occupied homes. If you change your home from a single family to a multifamily, or from a residential property to a mixed use property with a business, there can be major insurance gaps and impacts. If you intend to do this, talk to your insurance agent first. You may need a different policy entirely so don’t take any chances.
You Do Your Own Renovations
You might assume that your homeowner’s policy would cover you should something go wrong during renovations. However, this isn’t always the case. Let’s say that you and your spouse decide to tear out your bathroom. You think you’ve done everything correctly, put in your sweat equity, obtained your permits and passed the inspections.
Three months later you notice a puddle in the bathroom and a water stain growing on the wall. You call your insurance company and they tell you your policy only covers sudden and accidental occurrences, not faulty workmanship. Basically, you’re not covered. If you’d used a contractor, you could pursue them to correct the problem or sue them if they didn’t assume responsibility. If your workmanship causes the damage, your policy may not cover you.
Strengthens or Secures Your Home
Some remodels save you money, too. If you upgrade your home’s roof, put in storm-resistant windows and doors, add hurricane strapping, upgrade the electrical, or install a security system or smoke detectors, you may pay less for your insurance. Insurers realize these improvements reduce the chances of you filing a claim, because they reduce risk.
If you’re doing renovations now, talk to your insurance agent. Don’t wait until you finish, because you’ll invest plenty of money into your project and you may have materials on site too. If you were to have a fire or flood, or if someone broke into your home and stole items, you wouldn’t have adequate coverage.