The primary goal of most home renovation projects is to increase the value of the home. Whether you build a deck or paint the outdoor window frames, you are trying to add value to your home. However, far too many homeowners fail to account for a home renovation project when it comes to changing their home insurance policies.
If you remember anything from this article, remember this: Home improvement projects that boost the value of your home typically will make your home insurance plan lacking coverage. For example, if you install a pool and you do not tell your home insurance provider, anything that damages the pool will become your financial responsibility to repair.
Let’s look at a few important home insurance statistics, before we figuratively dive into the helpful pool of learning about the four ways a home renovation can affect your insurance rates.
Home Insurance Statistics
Homeowners have many misconceptions about home insurance, with liability insurance being the most often cited misconception. As the major component of a home insurance policy, liability insurance does not require you to pay a deductible when you file a claim. However, 84% of homeowners surveyed by Insurance.com inaccurately believed they have to send in the money for a liability insurance claim deductible. Insurance.com conducted its survey by contacting 1,000 homeowners located in several different housing markets.
The Insurance.com research study confirms the suspicion many insurance experts have that a majority of homeowners do not understand or they are confused about certain elements of a home insurance policy. Barely 50% of polled homeowners understand what homeowner’s liability insurance covers in cases that involve homeowner or family member fault. A little more than 20% of respondents believe liability insurance handles damage caused to the infrastructure of a home. Just under 20% of respondents thought liability insurance covers the costs of treating bodily injuries, which it does not. Medical payments coverage takes care of the cost of treating bodily injuries.
Here is how the respondents view property coverage:
• 60% percent accurately replied property insurance covers personal items up to a defined maximum dollar amount
• 29% inaccurately stated it replaces the items lost
• Seven percent incorrectly believe property coverage replaces lawn and garden features
• Four percent falsely think expensive jewelry and antiques receive property damage coverage
The startling misconceptions about home insurance makes it important for homeowners to know the four ways a home renovation can affect your insurance rates.
#1 Installing a New Roof
Jim Towns, who works as an Allstate Insurance agent in Illinois says installing a new roof can save you a considerable amount of money on a homeowner’s insurance policy. “The roof is probably the single biggest factor affecting your policy,” he says. “That’s where the majority of losses due to snow, wind, hail and rain occur.” If you live in an area that is susceptible to wind and hail damage, then you might be able to save even more money by installing a new roof. Home insurers typically penalize homeowners that make repairs to roofs, instead of installing new roofs. Many insurance companies follow a depreciation schedule for determining the value of a roof. The key here is to inform your home insurance company about the new roof installation.
#2 Making Bathroom and Kitchen Improvements
Nothing can make over a house with more financial impact than completing a kitchen or a bathroom upgrade. If you do not perform a makeover on your homeowner’s insurance policy, you can be left holding the proverbial financial bag when the time comes to pay for repairs. This is especially true if your bathroom or kitchen upgrade involves the installation of a new natural countertop.
By natural, we are referring to materials that are extracted directly from the ground for use in the construction of a kitchen or a bathroom countertop. Granite and marble are the two most popular types of natural stones used to design and manufacture countertops.
Highly durable granite is the ideal stone to use for building a countertop placed in an active kitchen. Granite resists the damage caused by strong impacts, such as the banging of pots and pans. The natural stone also resists the damage caused by prolong exposure to moisture, which is a common occurrence for countertops that include an embedded range. Granite slabs used for countertops do not let dirt and bacteria tarnish the surface.
Also a highly durable natural stone, marble enhances the aesthetic appeal of a kitchen or a bathroom. Unique veining makes the natural stone easy to customize to match any type of bathroom or kitchen design. Veining also does a great job of highlighting the brilliance of sunlight. Heat resistant marble is another natural stone that works well for culinary aficionados.
#3 Home Office
The rapid rise in the number of professionals working from home has sparked a large increase in the number of home offices. From adding high-end computer equipment to creating a new space devoted exclusively for work, adding a home office will require you to revisit your homeowner’s insurance policy to account for the extra value of your home. Many homeowner’s insurance policies protect the cost on the equipment used for home offices up to $2,500. If you plan a major home office upgrade, you have to consider the cost limitations placed in your homeowner’s insurance policy. This is especially true if the office is part of a home business, such as a studio to hold yoga lessons or an area to teach aspiring students the magic of learning how to play the piano.
Increasing the Amount of Living Space
Increasing the amount of living space is one of the most popular types of home renovations, as well as one of the most necessary home improvement projects. Think of a growing family that needs more living space for a child’s bedroom. Some homeowners create more living space to entertain guests or to enhance the current entertainment room. “Let your insurer know about any major addition before you begin, says Towns. “Say you put on a room addition and three-quarters of the way through, a fire destroys it. You want that to be covered.” Examples of things that need to be covered in an expanded living space include drywall, carpeting, and insulation.