Is your home insurance adequately protecting you?

If you’re doing a renovation, your standard homeowners insurance policy may not be good enough. There are two major reasons this can be the case.

Some remodeling projects, like additions, can increase the amount of money it would take to rebuild in case of a fire, a tornado, or another disaster. You may also be adding more expensive belongings, like a new set of furniture. That could mean you need more coverage to cover future rebuilding costs.

It’s also possible that your existing personal liability limits may not be high enough if someone gets hurt during the renovation. 

Having adequate insurance for your renovated home is crucial, so meet with an insurance agent to make sure your coverage is appropriate. You can also search for a new home insurance policy if your old one isn’t quite cutting it. Find the best policy for you with Insurify, where you need just a few minutes to compare insurance quotes.

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What Home Insurance Covers

Your home insurance will typically cover you if the remodel causes property damage, but there are a few exceptions. Here’s what you need to know about home insurance coverage and home renovations.

Before you start a project, review your coverage amounts to make sure you’re properly covered. Your insurance company needs to know about any projects that will add significant value to your home, whether you’re building a whole addition, adding a bathroom, or simply redoing the kitchen. The dwelling coverage amount—the money insurers will pay out for damage to your house—should match how much it will cost to actually replace your home.

If you hire a home improvement contractor, whose insurer will pay for damage usually depends on the type of damage, how it was caused, and your homeowners insurance policy. Your contractor needs to carry certain types of business insurance products, like workers’ compensation coverage and liability insurance. Your home insurance may help pay for repairs, or the contractor’s insurance may cover the damage.

One important thing to know about home insurance and general contractors is that home insurance policies don’t cover poor workmanship or defective building materials. If your contractor installs your shingles improperly, it’s on you to have them repaired or replaced. However, they sometimes will cover damage resulting from poor quality work, as long as that type of damage is covered by your policy. For example, home insurance policies typically cover damage from fire. Shoddy work by an electrician could cause a fire, and your policy will probably cover the fire damage, but not the cost of fixing or reinstalling the bad wiring.

Damage you cause to your neighbor’s home or property during your renovation probably won’t be covered by your home insurance. It may be covered by the contractor’s insurance if the damage was the contractor’s fault.

Additional Coverage for Renovations

It’s a good idea to review your existing policy before you start your renovation. Your insurance agent may recommend that you update your existing policy. Here are a few changes you could make

Increase the amount of insurance you have. Your existing insurance may not have high enough limits to cover a renovation that raises the value of your home.

Increase your liability coverage limits during the renovation. Liability coverage protects you if someone outside your household gets hurt while they’re helping you with the renovation. This is especially important if you’re doing a DIY renovation with no contractors. This way, if someone gets hurt, they can submit their medical bills to your insurance company. That lowers your chances of getting sued.

Increase your liability coverage limits after the renovation is finished. This is important if your renovation includes an “attractive nuisance” that can attract people to your property, like a pool or hot tub.

Increase your coverage for personal possessions. If you bought any expensive furniture or other new personal possessions as part of the renovation, you might need to increase your personal property coverage limits.

Add renovation coverage. You may hear this referred to as “dwelling under renovation,” “dwelling under construction,” or “renovation insurance.” This is an add-on to your existing policy. Renovation insurance covers two important things. It protects building materials that are on their way to or on your property. They could be damaged or stolen from the job site. It also protects you in case of foundation collapse if the foundation is damaged during construction.

Purchase vacant home insurance. If you’re living somewhere else while your home is being renovated, your agent will probably recommend that you buy vacant home insurance, especially if the renovation will take more than 60 days. This will protect you if damage happens to your home and you don’t notice it until you move back in.

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The Coverage Your Contractor Needs

Your contractor needs to hold certain types of insurance policies to work on your home. Only hire contractors who have adequate insurance coverage, and verify that they have the right insurance by reviewing their policies before hiring them. Contractors need two key kinds of insurance.

Commercial business/general liability insurance policy: All contractors should have this type of insurance. This is for individual contractors who don’t have employees and thus can’t purchase workers’ compensation insurance. They might hire independent subcontractors to complete parts of your home improvement project. Their liability insurance will protect you if your property is damaged or any of the subcontractors get hurt.

Workers’ compensation coverage: If your contractor has their own employees, they need workers’ compensation. It protects you in case the contractor’s employees get hurt while working on your home. If your contractor doesn’t have this and someone gets hurt, the injured person can sue you.

You should also verify that the contractor offers a warranty on the work they perform on your home. Ask for a written warranty that backs up the workmanship and materials in your project for at least a year.

Frequently Asked Questions - Home Improvements and Homeowners Insurance

What if my contractor’s insurance is inadequate?

Don’t hire a contractor or subcontractors if you can’t verify that they have adequate insurance coverage. If it’s too late, and you’ve just discovered that their coverage isn’t good enough, consider extending the limits of your homeowners policy’s liability coverage.

Will my renovations increase my insurance premiums?

Maybe. Projects that increase the home’s value may increase your premiums—for example, a new bedroom or an addition. As a general rule, extra square footage increases the rebuilding costs of the home. Higher-end materials also increase rebuilding costs. However, some home improvements can lower premiums—think of a new roof made with sturdier materials that are more resistant to storm damage. Installing safety devices in the home can also lower your premiums.

I’m doing a DIY renovation. What coverage do I need?

It depends on who’s helping you and whether you’re paying them. Someone who’s helping you for free will have their medical bills covered by your homeowners policy (though you might want to increase the limits just in case a major accident happens). If you hire a subcontractor or pay a friend, that makes you an employer. That means you need to buy workers’ compensation insurance to cover you if someone gets hurt.

Conclusion: Protect Your Renovation 

Your home insurance may be good enough to protect your home improvements, but the only way to know for sure is to review your policy ahead of time to make sure it’s good enough for you.

Make sure your homeowners insurance is up to snuff by comparing quotes through Insurify, where you can get quotes from top insurers with just a few minutes of research.

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Updated January 12, 2021

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