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HOME INSURANCE INSIGHTS

Insurance.com survey reveals top makeover mishaps and how much they cost. Plus, explains the role home insurance plays in damage done by contractors and homeowners during renovation projects.

Does homeowners insurance cover renovations

It all starts with a post on Pinterest.

There’s a gorgeous, immaculately staged photo that scrolls across your feed, and suddenly, you are enraptured by the possibility. This could be my home, you think, with just a few minor renovations.

Pinterest makes it look so easy, but when you are standing in the middle of a flooded kitchen, you’ll find yourself wondering why you ever got so swept up in the creative bug in the first place.

Insurance.com asked 1,000 people about their home improvement projects to see whether they were a success or failure. Findings reveal that going over budget and not completing the work are the top renovation fails.

Of those who had a home renovation fail:

  • 41% spent more than expected
  • 39% didn’t finish an important project
  • 12% had arguments with their partner or spouse as a result of the renovation
  • 5% experienced fire, flooding or other damage due to the work
  • 2% damaged a neighbor’s property

It’s reason enough to buy house renovation insurance before your next project. While homeowners insurance is designed to protect your home from damage, not all damages are covered under homeowners insurance during remodeling.

Here’s what you need to know before you pick up that hammer.

How does renovating affect homeowners insurance?

Often, when homeowners hire contractors to complete renovations, the contractor is responsible for securing and maintaining remodeling insurance coverage that is adequate for the project.

So does home insurance protect you as a homeowner when you make your own renovations?

The short answer is that every policy is different. That’s why you should always check your homeowners insurance policy to see what upgrades and renovations will be covered if something were to go awry. You also want to be sure that there is enough coverage in case someone were to be hurt during construction.

Be sure to carefully review your coverage limits to see what requirements and limitations may apply. When your upgrades are complete, it may make your home worth more than it was when you originally purchased your home insurance quote, so you may need to add extra coverage.

There are some factors that especially affect home insurance rates.

Renovations that impact home insurance rates

  • Kitchen renovations
  • Bath updates
  • Pool installation
  • Flooring
  • Increased square footage

You should be sure the dwelling coverage amount, or what the insurance company will pay out for damage to your house, matches how much it would cost to replace your home.

Contact your insurance company to discuss your planned renovations and talk through the specific add-on coverage options that you can add to protect your inner Martha Stewart. Some renovations may add significant value to your property, enough to require that you increase your existing coverage.

Your agent can advise you of recommended amounts.

Does homeowners insurance cover home improvements?

The average home insurance policy includes specific types of coverage.

  • Dwelling

This protection helps cover the cost of either repairing or replacing your home.

  • Other structures

When you have other structures on your property, like a garage, shed, or fence, this coverage kicks in to handle the repairs.

Liability coverage protects you from accidents and damages that can impact guests and their property.

Personal property coverage protects all of the belongings inside your home, such as your furniture, appliances, electronics, and clothes.

Your homeowners insurance usually comes to the rescue when damage is caused by a renovation.

Here’s the role your homeowners insurance plays in various renovation fails.

Faulty work done by your contractor

Even if you hire a professional contractor, home insurance policies won’t cover shoddy workmanship or defective building materials. So, if your contractor improperly shingles your house, for instance, you’d have to pay to have the shingles repaired or replaced. 

However, in some cases, your home insurance may cover damage that's caused as a result of poor-quality work, the III says, as long as the type of damage is covered by your policy. Let’s say, for example, an electrician doesn’t wire a room correctly, and it causes a fire. The damage from the fire would likely be covered, but not the cost to repair or fix the poorly installed wiring.

Damage you cause to your own home

Your home insurance covers your house during a remodel. However, that protection may not automatically extend to an addition. Make sure you check your home insurance coverage limits and be sure your replacement cost matches. You should hike your coverage limits if, for instance, an addition caused an increase in what it would cost to repair or rebuild your home.

Adjust your dwelling coverage limits to protect your addition or renovation

The cost to repair damage to your home or rebuild it completely at equal quality — at current prices – is the replacement cost. It is tied to the amount of coverage you select and the amount your insurer will pay you if you file a claim. So, you should adjust your dwelling coverage amount to what best matches your home's replacement cost. Otherwise, you’ll be underinsured.

Damage you cause to a neighbor’s home or property

If your renovation goes awry and you cause damage to a neighbor’s house or property, the neighbor would file a claim to pay for the damage with his or her own home insurance policy. So, for instance, if a tree falls on your neighbor’s house or porch, the neighbor would file a claim, not you. The major exception to the rule of thumb that your neighbor's insurance will pay is the case of negligence on your part. If your tree was dead or diseased, and a judgment or settlement finds that you knew or should have known about that, you could be legally liable for the damages. This is especially true if your neighbor has documentation proving that he or she complained to you or the city about the state of your tree.

If your contractor caused the damage, your neighbor would generally be compensated through the contractor’s insurance claim. However, when you do the repairs yourself, you face greater personal liability, making home insurance coverage that much more critical.

What is home renovation insurance?

Home renovation insurance goes above and beyond to protect your repairs and renovations when and where your regular home insurance policy falls short. Also known as dwelling under renovation insurance, this can be the life preserver you need if all does not go according to plan.

What does renovation insurance cover?

Renovation insurance includes some specific protections that are absent from the typical home insurance policy.

  • Vacant home

Some renovations may make your home temporarily unlivable. During this time, you may need special coverage if your home is unoccupied for more than sixty days, because most home insurance policies are designed to cover owner-occupied properties.

  • Construction

Renovation coverage also covers any building materials you purchase. This covers them only while on your physical property but also if anything were to happen to these materials while they are on the way to your home.

  • Foundation instability

There are common issues that can occur during home renovations, such as hydrostatic pressure, which can cause basement walls to collapse.

But what if you use a contractor? Does homeowners insurance cover damage caused by a contractor?

If you decide to use a professional service, ask to see the certification of insurance before contracting a company. It’s important that contractors are properly licensed with active liability coverage, property coverage, and workers’ compensation insurance. This should be the same for any subcontractors that may be used.

How much does home renovation insurance cost?

Home renovation insurance should not be an enormous expense. In most cases, you simply need to increase the coverage limits of your existing policy to cover the added liability during construction. You may need to add on some new insurance protections, but your insurance company can help guide you through what protections you may need.

No matter the cost of house renovation insurance, it’s certainly an expense that is highly recommended. Renovating your home can bring not only added enjoyment in your home but increased value, too.

Home renovations gone wrong: How much renovation failures cost homeowners

The cost of remodeling a house often plays a big role in why these projects can be stressful. Having your bottom line hammered by a makeover mishap doesn’t help. Insurance.com’s survey also looked at how much different types of renovation fails cost homeowners. Most of those who didn’t finish a project were out by less than $2,000, while most of those who spent more than expected went over budget by more than $8,000.

Here is how the findings break down.

Did not finish an important project%
$2,000 or less52%
$8,001 or more18%
Between $2,001 and $4,00015%
Between $4,001 and $6,0007%
Between $6,001 and $8,0007%

When it came to how much a renovation failed, 26% of survey respondents said it was over $8,001.

Of those who spent more than they budgeted, here is how it breaks down by price range.

Spent significantly more than expected%
Equal to $8,001 or more26%
$2,000 or less24%
Between $2,001 and $4,00021%
Between $4,001 and $6,00017%
Between $6,001 and $8,00012%

Of those who had spats over remodeling, the findings revealed the costs were relatively low for the majority.

Resulting arguments with significant other%
$2,000 or less56%
Between $2,001 and $4,00026%
Equal to $8,001 or more24%
Between $4,001 and $6,00017%
Between $6,001 and $8,0003%

Twenty-six percent of those surveyed who had damage to their own house during a renovation said the accident cost between $4,001 and $6,000. Twenty-two percent said it bumped costs by $6,001 to $8,000. Another 22% said it tacked on $8,001 or more to their project expenses.

Though just 2% of those surveyed said their rogue renovation damaged a neighbor’s property, it was costly when it happened. A third said it put them out more than $8,001, while another 33% said it cost between $4,001 and $6,000.

The verdict: Does homeowners insurance cover home improvements and renovations?

The bottom line is that you can’t go wrong by talking to your insurer before beginning any renovations in your home. While homeowners insurance may cover some of your more basic, everyday repairs, a major renovation could bring all sorts of liabilities that your run-of-the-mill home insurance policy simply won’t cover. You may not need an additional home renovation policy, but most renovations do impact your home property in other ways, such as your home value and construction materials.

Before you begin that next big home renovation, pick up the phone and check in with your friendly homeowners insurance agent to make sure you’re protected, no matter what happens.