Should I Tell My Insurance Company About My Home Renovation?

Renovating your home can be an exciting prospect. There’s the fun of exploring new designs, shopping for materials, and the prospect of shiny new appliances and an upgraded living space. But while it’s easy to get caught up in the endless phone calls, blueprints, and meetings with contractors, it’s also easy to forget one important little detail: you have to notify your insurance company of any major alterations to your home.

If you’ve neglected this step yourself, just know that you’re not alone. According to a report by the Hanover Insurance Group, an estimated 40% of homeowners fail to notify their insurance company when they do major renovations, and many don’t even realize it’s necessary.

So should you always notify your insurer if you make renovations to your home? The answer is: absolutely yes.

Why Should You Notify Your Insurer?

source: thezebra.com

The main reason why you should always inform your insurance company of any major renovations is also one of the major perks of making those renovations: they significantly increase the value of the home. If you build a new structure that adds square footage, upgrade your appliances, install smart home technology, or even upgrade your materials to something more green and sustainable, you add value to your home.

This is good for your equity, but it also means you are likely to need more coverage. Those smart home devices and new appliances cost money to replace if they’re damaged or stolen, and if you don’t have enough coverage, you’re going to be paying out of pocket to replace or repair them. Failing to inform your insurer isn’t necessarily going to get you in trouble, but it’s a reckless move — you’re taking a risk of ending up underinsured if the worst should happen.

Renovations That Can Increase Your Premium

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source: performanceadjusting.com

Now let’s talk a bit about what renovations can increase your premiums and why.

First and foremost, there’s the classic swimming pool. A swimming pool can significantly increase a property’s value, as it’s a highly appealing feature to most buyers. But there are a couple of reasons why it’s likely to bring your insurance premiums up: first, it adds value to the property; and second, it increases your liability. Insurers often consider swimming pools “attractive nuisances” as they raise the risk of drowning, slipping, diving board injuries, and more. In the case of a pool, it’s best to up your liability coverage significantly, as you might end up on the hook for significant medical expenses otherwise.

Adding a home office to your home can also increase a home’s value, but may require either a hike in your premiums or a special endorsement to increase coverage for business-related assets such as computers and other work equipment. The average homeowner’s policy will protect a home-based business up to around $2500, but that may not be enough for your needs.

As previously established, building an extension or new building, as well as upgrading your kitchen or bath, will add value to the property and may necessitate more coverage. The same goes for renovating or replacing your roof.

Renovations That Can Lower Your Premium

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source: aon.co.za

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Ironically, a renovated or replaced roof can also lower your premiums, particularly if it means increased durability against storms and extreme weather events. In general, any renovation that lowers the risk for insurance companies is a candidate for also lowering your premiums. Burglar alarms, remote cameras, and other security equipment is one way to accomplish this — the increased safeguards against burglary mean a smaller risk of a claim. The same goes for storm windows and doors, reinforced construction, and anything else that increases resistance to weather damage.

Keeping Those Premiums Low

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source: generazio.com

No one relishes the thought of costly renovations that end up costing you even more in annual premiums. But what can you do?

There are a few strategies you can employ to try to keep those home insurance rates under control. First of all, you can try including renovations that lower premiums along with those that increase them. The offset may not be total, but it can help mitigate the price increase a bit.You might also consider shopping around and comparing home insurance quotes — something that makes smart financial sense whether you’re renovating or not. 

Finally, while it’s important to keep your insurance company in the loop, don’t assume that because you renovated, your premiums are going to skyrocket. Talk to your insurer and see if there are any discounts or programs available, and find out if you have sufficient coverage already. This, incidentally, is another great reason to shop around and compare quotes — you might find better coverage for the same amount of money, or even less.