Does homeowners insurance cover renovations?

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.

But if you decide to undertake your own home renovations, does home insurance protect you as a homeowner?

Every policy is different. You should always check your homeowners insurance policy to see which upgrades and renovations will be covered if something goes awry. You also want to be sure that there is enough coverage in case someone is hurt during construction.

Carefully review your coverage limits so you understand the requirements and limitations that might apply. When your upgrades are complete, your home might be worth more than when you originally purchased your home insurance, so you might need extra coverage.

Which renovations affect home insurance rates?

Some renovations are particularly likely to impact your homeowners insurance rates. They include:

• Kitchen renovations
• Bath updates
• Pool installation
• Flooring
• Increasing the home’s square footage

So, make sure the dwelling replacement cost coverage -- 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 planned renovations and talk through the specific available add-on coverage options that can protect your home.

Your agent or representative can advise you about recommended amounts of insurance coverage.

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 – such as a garage, shed or fence -- this coverage kicks in to reimburse the repairs.

• Personal liability. Liability coverage protects you from accidents and damages impacting guests and their property.
• Personal property. Personal property coverage protects all of the belongings inside your home, such as your furniture, appliances, electronics and clothes.

The good news is that your homeowners insurance often comes to the rescue when a renovation causes damage. The bad news is that this is not always the case.

Here’s the role your homeowners insurance plays in various renovation-related damages.

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, you will have to pay to have the shingles repaired or replaced, or due the contractor.

However, your home insurance may cover damage that's caused as a result of poor-quality work, as long as your policy covers the type of damage. For example, if an electrician doesn’t wire a room correctly and it causes a fire, the resulting damage from the fire would likely be covered. However, you would still be responsible for the cost to repair or fix the poorly installed wiring.

Damage to an addition that wasn’t permitted

Your home insurance covers your house during a remodel. However, that protection may not automatically extend to an addition, especially if you built it without a permit.

Check your home insurance coverage limits and make sure your replacement cost matches the value of your home, including the new addition, and make sure you have the permits you need.

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 generally will 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 typically files a claim, not you.

The major exception to this rule of thumb is if the damage results from negligence on your part. For example, 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 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 or dwelling under construction insurance, this can be the life preserver you need if all does not go according to plan. It may even be available as an endorsement.

Another type of insurance -- builders risk insurance -- also is designed to cover risks related to a home construction project.

What does renovation insurance cover?

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

• Construction materials. Renovation coverage covers any building materials you purchase. This covers them not only while on your physical property but also if anything happens to these materials while they are on the way to your home.

• Foundation instability. Hydrostatic pressure can cause basement walls to collapse during construction. This occurs when water puts pressure on the walls. Home renovation insurance covers this damage.

In addition to renovation insurance, you may need to purchase vacant home insurance. Some renovations may make your home temporarily unlivable. During this time, you may need special coverage if your home is unoccupied for more than 60 days because most home insurance policies are designed to cover owner-occupied properties.

Ask your insurance company whether your homeowners policy will cover your home during this time or whether you should purchase vacant home insurance.

If you use a professional contractor, ask to see the insurance certification before contracting with the company. Contractors must be 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 risks during construction.

You can usually add an endorsement to your policy for a small fee, which will not last forever. Ask your insurance company for a quote on the coverage. Bear in mind that the end result of the renovation could increase your insurance rates if it increases the reconstruction cost of your home.

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

The bottom line is that you should always talk 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. Still, most renovations do impact your home property in other ways, such as by increasing your home value or requiring you to store expensive construction materials at your home.

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