Does homeowners insurance cover home renovation projects?
Last updated: January 1
There are a lot of things you usually do before kicking off a home renovation project. Whether you're planning a home addition or want to improve your existing space, you might start by browsing blogs and building Pinterest boards to organize your ideas. Then, there's the whole process of setting a budget, vetting contractors and securing the necessary permits (not nearly as fun, of course).
But what about homeowners insurance? Does reaching out to your agent even cross your mind as you plan a home improvement project? Because it should.
Why should you notify your agent?
You may run a risk if the limits on your homeowners insurance policy aren't high enough to cover the increase in your home's value after a home renovation. If something happens to your home and you need to rebuild it, you'll want to know that your policy provides sufficient coverage. Be sure to tell your agent about improvements you make to your home and ask if you should increase your coverage limits, says the Insurance Information Institute (III).
What policy changes should you make?
Before construction begins, you may want to ask your agent whether your existing homeowners policy should be updated, says the III. Insurance Journal says that it often makes sense to incrementally increase your coverage limits as the project progresses.
If it's a major project — you're adding on a new room, for instance — you may also want to specifically list the addition on your policy, suggests the American Institute of CPAs (AICPA).
What about the contractor?
Beyond that, you should also think about the risk of injury that comes when you have contractors on your property. You can help protect yourself against a potential lawsuit by verifying that your contractor is properly insured, the III says — namely that he is armed with liability insurance and workers' compensation coverage.
Ask to see proof of your contractor's insurance, suggests the AICPA, and make the same request of any subcontractors on the job (electrician, plumber, etc.).
What If It's a DIY Job?
Of course, not every home improvement project is farmed out. If you plan on a do-it-yourself project and expect to have friends or family lending a hand, you should also check that your own liability coverage is up to snuff, the III says.
While it may be hard to believe, you may still run the risk of a lawsuit if a friend or family member who doesn't live with you is injured while helping out. That's why the III suggests raising the amount of no-fault medical protection on your homeowners policy. With this coverage, if someone gets injured, they can directly submit medical bills to your insurance, which may lessen the likelihood of you being sued, says the III.
Finally, as with any big project, organization is key. Keep copies of any contracts and receipts for materials purchased for the home renovation project. And take photos before, during and after the remodeling so you have a visual record of all the work.
Taking the time to do all this may add a few steps to your remodeling project. But having documentation and sufficient homeowners insurance coverage in place may help protect you against the many perils that even the smallest home renovation project might face.