In many cases, your homeowners’ insurance policy covers renovations but might not cover major overhauls, like remodeling. As more people are staying home, home improvement has skyrocketed. Whether it’s adding an office or upgrading a kitchen, home remodeling and renovation spending are up. Here’s what to look out for and how to make sure you’ve got the right coverage.
What is home renovation insurance?
Home renovation insurance, also called dwelling under renovation insurance or builder’s risk insurance, is homeowners insurance that covers your home during renovations and remodeling projects.
This goes above your standard homeowners insurance policy. Each policy has its own coverage limits, depending on the worth of your home and the policy you chose.
What does renovation insurance cover?
Renovation insurance covers your home during and after home improvements take place. It’s there if you or someone else is hurt during a renovation in your home or if there’s been damage to your home or surrounding areas during the process.
Most home insurance policies require you to insure your home for at least 80% of its replacement value.
According to the Independent Insurance Agents and Brokers of America, one in four remodeling projects increases the value of a home by more than 25%. Chances are, you may need to increase your coverage to reflect the impact of renovations on your home’s value.
How much does home renovation insurance cost?
The cost of home renovation insurance depends on your situation, including your current policy and the renovation or remodeling project. You might not need to pay any extra in some cases, especially if your renovations are minimal.
Renovations are minor updates, while remodeling is usually a complete overhaul of an existing space or adding a new one. Your agent will know the cost of each project, so you’ll want to make sure you reach out before a project starts — not after.
Remember that even if you add specific coverage, like “dwelling under construction,” there are some projects that can reduce your premiums during your renovation. For instance, replacing an old roof can lower premiums.
Usually, though, if you complete a project that increases the value of your home, you can expect higher premiums. The more square footage, the higher the cost will be to rebuild the house in case of an emergency.
Do I need home insurance for renovations?
Before you get started on any renovations or remodeling, reach out to your homeowners’ insurance company. Let them know you’re renovating so they can determine what your policy does — and does not — cover.
Remember, insurance is there when you need it, and you always hope you don’t. If something happens during the home renovation or remodeling, you’ll need to have adequate insurance.
Along with that, your project could increase the value of your home and your coverage. An updated policy will reflect the most up-to-date changes on your home.
You might already be in contact with your insurance company if the work you’re doing is a result of damage done to your home, like a fire or natural disaster.
In a recent study, we discovered that 26% of home renovation projects with costs over $8,001 ultimately failed. Another 52% of projects with costs under $2,000 failed.
Does homeowners insurance cover home improvements?
Most policies cover home improvements, but you’ll need to talk to your agent to see what your policy covers. Your project may change what type of coverage you have.
The typical homeowners insurance policy includes four main types of coverage:
- Dwelling coverage: covers the cost of repairing or replacing your home
- Other structures: covers the cost of repairing or replacing other structures on the property
- Personal property coverage: covers belongings inside the home
- Personal liability coverage: covers you in accidents and damages that impact guests or their property while on your property
If you’re handling the improvements yourself, like switching out a bathroom sink or installing a new oven range, you’re probably covered. Even then, it’s a good idea to check your policy to make sure you have enough liability protection in case a friend helping you out gets injured.
But if you have contractors or specialists in your home, you should also require insurance coverage.
Does home insurance cover damage I cause?
For the most part, do-it-yourself projects are covered. But you might want to raise your coverage limits before you start in case something catastrophic happens and your materials get ruined. If you don’t, you might not be covered for the full extent of the damages.
Alongside that, if you or a friend is hurt while working on your home, your insurance will cover their medical bills up to your coverage limits.
Make sure if your DIY project involves an addition to the home that you get the value of that addition added to your homeowners policy.
Home remodeling tips
If you’re getting ready to start a renovation or remodeling project, make sure you’re fully prepared first.
“Renovations and remodels are exciting, but can also be stressful. It pays, both literally and figuratively, to do your research in advance and go into the project prepared.
Part of that preparation includes making sure you’ve got the right home insurance coverage to protect you and those around you in the event the project goes terribly wrong,” says Ashlee Tilford, Insure.com Managing Editor.
- Contact your home insurance company. It’s a good idea to have your agent’s number saved in your phone. You’ll want to reach out before you start a project to see what your policy covers and talk about your renovation plans. When you’re about to get started, you may want to add an umbrella policy to ensure you have enough coverage. When the project is complete, your policy should reflect the changes to your home. Your agent is your partner in this; keep them updated every step of the way.
- Check everyone’s insurance. If you’re doing a project yourself or with a friend, your existing home insurance policy should have you covered. But if you’re hiring outside help, check everyone’s insurance, including the general contractor and any subcontractors they hire. You’ll want to review each policy to make sure that if anyone gets hurt on your property, their insurance covers them, and they won’t come after you.
- Compare costs and shop around. Don’t settle for the first contractor you find. Shop around for contractors and get a few quotes and see what others have said about their work. You can do a simple online search to see if previous customers were happy with the final products. This also applies to home insurance. Even if you feel loyal to your current insurance company, it never hurts to take a look at the best home insurance companies and make sure you’re getting the best coverage at the best price.
FAQ’s for home renovation insurance
Will homeowners insurance cover damage I cause to a neighbor’s property?
If damage is done to a neighbor’s property, the neighbor would need to file a claim on their own home insurance policy.
If the damage was determined to be a result of your negligence, you may be required to cover the costs, in which case your personal liability coverage should kick in up to the coverage limits.
If your contractor causes damage to a neighbor’s property, the contractor’s insurance coverage should kick in.
Why do I need insurance for renovations if my contractor has insurance?
It’s great — and necessary — for your contractor to have insurance. Even if they do have it, you should expand your own. Add “dwelling under construction” coverage while renovations are happening.
Also, extend your liability and personal protection coverage during and after renovations. If your contractor is adequately insured, and so are you, you are much less likely to face financial hardship if damages occur.
Will homeowners insurance cover me if my contractor doesn’t finish?
This depends on what the contractor completed up until this point and why they didn’t finish. For instance, they might’ve overbooked and just need more time to finish your project. Or you’ve paid them upfront for a job they stopped showing up to.
You’ll want to check your coverage limits and speak with your insurance agent to see if your policy covers what a contractor has completed up through this point.
Legitimate contractors and subcontractors have their own insurance. There are two kinds to look out for: commercial business insurance (also known as general liability insurance) and workers compensation.
In case your contractor or someone who works for them gets hurt on your property, your contractor’s insurance will cover it.