Insurance provides the ultimate peace of mind. This is especially true in the realm of homeowner’s coverage, where insurance can help you recoup hundreds of thousands of dollars in equity in the event of disaster. However, it is important to note that not all homeowner's policies will provide adequate coverage during renovation projects. With this in mind, keep reading for some additional types of coverage to consider during and after construction.
Insurance To Consider During Renovation
Before starting work on a renovation project, there are a few types of insurance policies to protect you during construction.
Contractors are required to carry adequate liability and worker’s compensation insurance to get licensed in most states and municipalities. Therefore, if a contractor refuses to provide proof of license, be very cautious. Not only is it a bad idea to trust the quality of an unlicensed contractor, but you could be in a bind from a liability perspective if an accident were to occur during construction.
Assuming that all contractors are on the up-and-up, the main reason to increase liability coverage during renovation is when performing DIY projects. If you offer the neighbor a couple hundred bucks to help you install some deck railing that will only take a couple of hours and he/or she gets hurt during that time, the basic liability coverage that comes with a standard homeowner’s policy may not be enough.
But my homeowner’s insurance policy says that I have liability coverage of up to $300,000. Surely that is enough to cover any injury that would occur during a DIY project?
Not so fast.
That type of liability insurance is meant to cover you in the event that you are sued when your property causes injury to a non-resident or a non-resident’s possession. It is meant to protect the homeowner in the event of a major, life-altering event that happens to someone else as a result of your homeownership.
What you need to be concerned with is a specific subsection of liability coverage called medical bills coverage. This coverage usually ranges from $1,000 to $5,000 and will pay for basic medical bills of someone who gets hurt on your property. This amount can be increased up to $25,000 if additional premium is paid. Therefore, it is a good idea to take out the extra coverage to guarantee that anyone helping you on a DIY job is adequately covered and there is no threat of matters ever escalating to litigation over something like a broken hand or a gash that requires stitches.
Builder’s Risk Insurance
Sometimes referred to as “dwelling under renovation” coverage, this is probably the type of coverage that most homeowners will be interested in when performing a renovation.
This type of insurance helps protect your home from risks involved from the construction process itself. Fire, impact, hail, explosion, acts of God, or any other types of incidents that damage the project or other areas of the home are all covered under this type of insurance.
This type of policy even covers raw building materials. If they are damaged or lost during transportation, stolen or vandalized at the construction site, or ruined by the weather, a builder’s risk policy will have you covered. It will even apply to tools and equipment and can extend to anyone who has a financial interest in the project, such as the homeowner, contractor, subcontractor, or lenders.
Vacant Home Insurance
Many homeowner’s policies require a claim to be filed within a certain time frame after the damage occurred. However, some lengthy renovation projects cause the homeowner to be displaced for an extended period, making it impossible to notice damage in this window. Therefore, if you will be away from your home for more than 60 days while renovations are being performed, vacant home insurance can protect you against unnoticed damage.
Insurance To Consider After Renovation
While there are some good insurance products to consider during renovation, there are also a handful that will be beneficial once the project is complete.
Some renovations cause significant boosts in property value. If your home is insured for $300,000 but a project increases the value of your home by $25,000, then you will need to increase your coverage upon completion. Prior to starting a project, compare boosts in value when choosing aluminum vs vinyl siding or asphalt vs slate roofing to get an idea of how different projects may affect your premiums.
This usually occurs when adding items such as swimming pools, gyms, or fire pits to your property. If the renovation project makes it even slightly more likely that guests will be at a higher risk of major injury on your property, consider permanently increasing liability coverage.
Personal Possessions Insurance
This would occur when a renovation results in the acquisition of new possessions. If you looked into the best way to waterproof basement walls and decided to finish your long-abandoned basement, it is likely you would purchase more items, such as televisions, furniture, etc., to make the renovation complete. As such, a bump in personal possessions insurance would be necessary.
Forward Project Details to Your Insurer
As renovations add value to your home, it is intuitive to assume that they will cause the price of insurance to go up. While this is generally the case, there are some instances when renovations may actually cause premiums to go down. For example, if you add fire resistant roofing in an area prone to drought or storm windows in an area prone to hurricanes, it is possible that your insurance company will view you as lower risk and decrease premiums to reflect that. When you make these kinds of upgrades, be sure to forward the project details to your insurer so they can re-calculate your rate.
Update Your Insurance For Peace Of Mind For Renovation
Many homeowner’s insurance policies will not provide adequate coverage to account for renovation. Therefore, it is important to update coverage accordingly. By using the ideas listed above or the resources found at All About Insurance, you can be sure to sleep easy knowing that you are covered during home renovation.
Max Shafer is a freelance writer that loves sharing his knowledge and expertise on real estate. He lives in Land O’ Lakes, Florida where he enjoys spending time with his wife and researching real estate trends in his free time. Max’s work as a freelance writer can be found on Building Product Advisor, a new construction industry resource site.