When it comes to remodeling your house, some improvements may lower your rates, while others may raise them. Here’s what you need to know.
Key takeaways:
- Your rates will go up or down depending on the kind of renovation you’re doing
- Renovations that make your home safer will often lower your rates
- Talk to your provider about your renovation plans to find out how they will affect your insurance
There are many reasons to renovate your home. Maybe your family has grown or your kids have left the nest. Maybe you’re sprucing it up before putting it on the market. Or perhaps you’ve finally decided to put in that pool and hot tub you’ve always wanted. Whatever the reason, it’s important to consider how these renovations will affect your homeowners insurance policy before moving forward.
Below, we’ll dig into the potential impact different types of renovations can have on your premiums.
Renovations that can lower your rates
When you make changes to your home that improve its safety, your rates can go down. These can include (but aren’t limited to):
- Roof repairs. When your home is protected with new materials, like roofing, it can save you money on your policy in the long run. Plus, if you live in a state that’s prone to hurricanes or other weather-related disasters, you can save more when you install roofing that has special loss-mitigation measures such as impact-resistant shingles or hurricane straps. Be sure to read the fine print before starting the work – some policies cover all roof repairs, while others use depreciation schedules that set coverage rates based on the age of the roof. The older the roof, the less coverage.
- Upgrades to plumbing and wiring. If your home’s wiring and plumbing aren’t up to code, you could get a cheaper rate by improving them. New wiring lowers the risk of electrical damage and fires. Knob and tube wiring is one of the biggest issues in older homes – and one of the biggest opportunities to save. Upgrading the wiring may also make you appealing to more insurers, giving you the opportunity to shop around for a cheaper rate. With plumbing, getting rid of polybutylene and lead in your pipes can have a similar positive effect.
- New windows and doors. Upgrade to storm- or impact-resistant windows, or new exterior or garage doors, and you’ll bring down the potential for wind and rain damage. If you live in one of America’s windiest states, this kind of renovation could significantly lower your rates.
- Updated water shutoff devices. Water shutoff devices cut off the flow when they detect damage to water lines, pipes, and other plumbing infrastructure. They’re relatively small investments (around $200 to install) that can prevent costly damage, which can potentially lower your rates.
- New home security system. The better protected your home is, the more you can save, sometimes as much as 15 percent. Your discount will be higher if you have more than one type of security device, including deadbolts, burglar alarms, and 24/7 monitoring.
Now that we’ve counted off the ways renovations can lower your premiums, let’s take a look at some that can raise them.
Renovations that can raise your rates
The good news is that the following types of renovations can increase the value of your home. Unfortunately, that also means that the cost of your insurance may also increase. Here’s a glimpse into what to expect.
- Kitchen and bath improvements. Depending on the upgrades you make, remodeling your bathroom or kitchen can give your home more than 50% in recouped value. However, high-end improvements like custom cabinets or granite countertops may require you to increase your dwelling coverage.
- A new pool. A pool can raise the value of your home and be an extra enticement to potential buyers. But it also falls under the category of “attractive nuisance,” which can raise your liability – and your premiums. Add a slide or diving board, and the rates could go even higher. You may also need to add more liability coverage or an umbrella policy in case someone is injured in or around the pool.
- A home office. With the rise of remote work in recent years, home offices are becoming more common. While this is great for convenience and commuting costs, it can increase your insurance rates and potentially require additional coverage for business assets. Not all insurers cover business-related liability, so it’s important to ask, particularly if your profession involves a lot of client foot traffic in your home. If you do need to add more business coverage, there are a few ways to do it.
- Adding to your space. Whether your family is growing, or you need a place for that aforementioned home office, sometimes you just need more space. It may involve finishing your attic or basement or building a new addition. In any case, you’ll at least need more dwelling coverage, but potentially other coverage as well. For example, a refurbished basement with new insulation and drywall may require sewer backup coverage.
Now that you know what kinds of renovations can raise or lower your insurance costs, it’s worth asking if you have enough coverage.
Do I need more insurance?
Will you need additional insurance once your renovations are complete? The short answer – it depends. You need to consider your current level of coverage and the type of renovation you’re doing. When you first buy your home, your initial insurance rate depends partly on the square footage and partly on its age, which determines the estimated costs to fix or rebuild it. The age of your appliances is also a factor, including HVAC and plumbing.
Insurers use valuation tools to work out all of these considerations and give you a final number. When that valuation goes up, it’s good to think about increasing your coverage rather than risking large out-of-pocket expenses if something goes wrong down the road.
Three home renovation insurance tips
Now that we’ve walked through the impact of home renovations on your policy, here are some quick tips to easily navigate the process.
- Tell your insurance company. Renovations can take up a lot of time and mental energy, so it’s easy for the little things to get lost in the shuffle. But be sure to take a moment to call your insurer to let them know. It could save money and cause future headaches. Also, if the renovations require you to live somewhere else for a while, you’ll want to check how long you can maintain your coverage while away. If you need more time, you can request a vacancy permit.
- Read your plan carefully. Before you put a shovel in the ground or pull out that crowbar, be sure to go over your insurance plan carefully. Some of the coverage options we’ve discussed – dwelling coverage, vacancy permits, sewer backup coverage, umbrella policies – may or may not already be part of your policy. Knowing what you have going in will make the whole process easier.
- Consider additional coverage. Once you know what you have, you then need to decide if you need more. Some additions to consider to your policy include builders risk insurance, vacant home insurance, and contractors insurance.
These tips will hopefully be helpful in ensuring your renovations go as smoothly as possible.
You don’t need to renovate alone
Your home is probably your largest and most important asset, so it makes sense to protect it. NICRIS Insurance is here to make sure you have the coverage you need so that your next big project goes off without a hitch. Get in touch today for more information.