With the growth in construction, it is no secret that the pandemic has inspired more than a few home improvement projects.
But what if we told you that these projects did more than improve your attitude towards being at home?
They have potentially changed your home insurance needs.
When completing home improvement projects, you need to tell more than your family, friends and followers on social media.
Your Bolder Insurance Advisor is actually one of the first people you should tell.
Specifically, you need to tell your insurance advisor about home improvement projects that potentially add value to your home.
Here are just some of the home improvement projects you should consider discussing with your insurance advisor:
- To rebuild or renovate part of your house
- A project that adds square footage to your house
- Adds a deck of cards
- Digging a pool
- Finish your basement
- Build a new structure (post plate, shed, garage, etc.)
- Replacement of your roof, siding, windows or similar exterior details
- All projects that add significant value to your house
How do home improvement projects affect my home insurance?
The main way that home improvement projects can affect your home insurance is that they can change the cost of rebuilding your home. And that̵7;s a big thing. After all, this is the main reason why you have insurance for your house: To repair or possibly rebuild your house in the event of a disaster (based on the insurance purchased).
Insurance companies often provide coverage based in part on the cost of completely remodeling your home in the event of a loss. Some insurances provide coverage on the basis of actual cash value (ACV). ACV is based on the age and condition of the property at the time of a loss.
The cost of rebuilding your house is called compensation cost. When you have insurance that pays on replacement cost, we want to insure the entire cost of rebuilding your house. Not necessarily what it can be sold for, but what it would cost to build new.
Read more: How to choose the best home insurance
Let’s look at an example.
Dominic and Sam buy a house. Two years later, they decide to add a garage. Later in the summer a strong storm comes and a big tree falls on their house.
Unfortunately, Dominic and Sam did not tell their insurance advisor about the garage they were building. So their insurance will probably only cover up to the limit of the insurance they bought, even if the cost of rebuilding with the garage is higher than that limit. This may leave them to pay part of the repair bill.
If Dominic and Sam had told their agent about their new garage, their insurance would have been adjusted to have sufficient limits to rebuild their home as it was when the loss occurred.
There are also endorsements or additions to policies that cover increased construction costs. This can help in a situation similar to our story above. However, even these recommendations may have provisions stating that you must notify your agent if any combination of home improvements will exceed a certain percentage of the replacement cost of your home.
The moral of the story: Tell your insurance advisor about your home improvement projects.
The policy limit you originally chose for your home insurance may not be high enough after your home improvement project. Your insurance company only pays the limit stated on your insurance. Talking to your insurance advisor to revalue your insurance can save you and your budget a lot of grief later.
Major updates can change how you are compensated for a covered loss
There are some situations where a home improvement project can actually change how we can compensate you in the event of a covered loss. While most homeowners policy has a replacement cost, there may be parts of the home that are only insured for real cash value, such as your roof. In the case of roofs, this depends on the age of the roof.
For example, if your roof is 20 years old, it can be insured at real cash value. But if you have recently replaced it, you may be entitled to a replacement cost on your roof. Telling your insurance advisor about the update helps ensure that your insurance is written with the best possible coverage.
It may justify a change in the limits of your home insurance
When you bought home insurance, you chose coverage limits. Boundaries are exactly what they sound like. Your insurance will cover up to a certain amount in dollars. Different coverages within your insurance have their own limits.
For example, your personal liability insurance within your home insurance has different limits you choose at the time of purchase. Liability protection protects you if someone claims against you or another insured due to a damage, property damage or other covered loss.
So if you have added a pool, your insurance adviser may recommend that you raise your liability limits due to the risk of potential damage and that more people come to your house to swim.
If your home improvement project built a post board or garage, the coverage limit for other structures may need to be increased.
Although these may seem like small adjustments, they can be the difference between being adequately insured or underinsured.
Are there other situations I may need to talk to my insurance advisor about?
In addition to major home improvements, there are other reasons to talk to your insurance advisor. Many home buyers usually think when they buy their home and get insurance, they are ready.
But there are actually lots of other changes that may need to be discussed with your independent Bolder Insurance advisor to make sure your homeowner’s insurance is up to date.
Examples of these changes can be:
- Changes in who lives in the home
- Changes in how much time you spend at home during the year
- Upgrading the contents of your home
- Installation of an automatic sprinkler system
- Installation of a home security system
- To adopt a dog
- Start a home-based business
Another aspect of your home that can change over time is the content inside. It is a good idea to keep an up-to-date home inventory to document the items in your home. Several free apps can help you quickly capture the information.
When your home and family change, tell your insurance advisor. This will help ensure that you still have the best coverage for your home
This article is provided by Auto-Owners Insurance, a Bolder Insurance partner