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Remodeling? Think about home insurance before you start

After years of saving money and drawing up plans, you've decided to remodel your kitchen. You may plan to knock a hole in your wall and rip out old appliances to make your dream happen. But before you call a contractor, reevaluate your home insurance needs, both during and after the renovations.

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Insurance tips for home remodeling

Things to keep in mind as you renovate, remodel, or add onto your home:

  • Keep your home insurance agent informed about your remodeling plans. Your agent can help you sort out coverage needs.
  • Know who is responsible for uninstalled appliances and other items, such as carpets and cabinets, in advance. Your contractor's insurance should cover these items.
  •   If you are concerned about medical bills should a family member or friend be injured while helping out with the renovations, a personal liability umbrella policy can pick up the bills where your home insurance policy leaves off.
  • If you're hiring a contractor, check with the Better Business Bureau and follow up on references. Ask for proof of workers compensation and contractor's liability insurance.
  • Having people you don't know working in your home can increase the risk of theft. It makes sense to protect any valuable personal property.

Source: Independent Insurance Agents of America

Most home insuranc policies require you to insure your home for at least 80 percent of its replacement value. One in four remodeling projects increases the value of a home by more than 25 percent, according to the Independent Insurance Agents and Brokers of America. Chances are may need to increase your coverage to reflect the impact of renovations on your home's value.

The National Association of Insurance Commissioners (NAIC) recommends reviewing your home insurance policy, whenever significant work is done on your home. “For instance, the addition of a room, new insulation and yearly inflation all increase the replacement cost of your home,” the NAIC points out.

Therefore, it's always important to review your policy to make sure you have enough coverage.

Who's doing the work?

Your home insurance company will cover the building materials you'll need for renovation. But you may want to raise your coverage limits before beginning work on your house. If a fire struck and destroyed both your home and the building materials, you might not be covered for the full extent of the damages unless you've updated your coverage limits.

It's not just your home's higher value that should figure into your insurance calculations. Whether you do the job yourself, or hire a contractor, also affects your insurance needs.

If you hire an outside person or firm, you should find out if the contractor has adequate insurance coverage before work begins. The contractor should provide proof of insurance, in the form of a "certificate of coverage," for workers compensation and contractor's liability insurance.

Workers compensation insurance covers injuries to the contractor and his employees while they're working. If a worker is injured in your home and the contractor does not carry workers compensation, you could be sued.  Your homeowners coverage would not pick up the bill. Workers compensation is required for employers in every state but Texas.

Contractor's liability insurance covers the contractor for damage to your property while it's under construction. For instance, if there's a big hole in an outside wall and the contractor fails to cover it properly during a rainstorm, water could leak in and cause major damage. Though homeowners insurance will cover these damages, your insurer will expect the contractor's insurance company to pick up the tab if you make such a claim. A reputable contractor will have this coverage and should provide proof of insurance.

For the do-it-yourself home-repair guru, your insurance needs depend on who's helping you and whether you're paying them. A friend or family member who's injured while lending a hand will have his medical bills covered by your homeowners policy.

Hiring a subcontractor or paying a friend makes you an employer. That means you should purchase workers compensation insurance to cover your liability in case of an injury.

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