Home improvements are a great way to raise the value of your home, enjoy a better lifestyle at home, and build the home you have always wanted. Renovations can add more space, update your kitchen or living areas, increase the energy efficiency of your home, or add certain luxuries that you have always dreamed of owning.
Whether you plan on renovating for your own personal enjoyment or you want to increase the value of your home before you sell, you should be aware of the consequences home improvements can have on your home insurance.
When you increase the value of the materials used in your home, add more space, or add to the risks involved in insuring your home, you may need better insurance coverage, and with that comes higher premiums.
If you are in the midst of making an insurance claim, and the insurance company is disputing the value of home improvements you have made and told them about, you may need the help of an insurance lawyer to effectively advocate for you. You can find more information about negotiating insurance claims at ViraniLaw.ca, but the first thing you should know is that you should always inform your insurer of renovations.
The following are examples of home improvements that will have the most significant impact on your insurance premiums.
Adding an Extension or Granny Suite
Your home insurance policy will help you rebuild your home in the case of a total loss and repair damaged belongings and construction materials.
Adding more square footage has a direct effect on the cost to rebuild should you lose your home to a fire or experience extensive water damage. When there is more home that can be damaged, costs will rise.
In addition to expanding your home with an addition, adding more living space by finishing an attic or basement can also be more expensive to replace and increase the risk of damage. The attic may be more prone to water damage from a leak in the roof, while a finished basement with new drywall, insulation, and carpeting may require sewer backup insurance.
Replacing old fixtures, flooring, appliances, countertops, and cabinets in your kitchen is a major undertaking, and it is one that can also have a major impact on your insurance. Usually, kitchen renovations involve replacing a lot of older materials with new ones, from your floor tiles to the fridge.
A complete remodel can have significant effects on your home insurance because you are raising the cost to replace it in case of a loss. Insurance policies often use Actual Cash Value or Replacement Cost coverage to determine how much you will receive in compensation in case of loss.
When you replace older construction materials, fixtures, and appliances with new and higher-quality materials, you are increasing the cost you will face to replace them. If you are relying on your insurance coverage to cover all costs, your coverage and/or premiums may need to be adjusted to reflect these higher costs so that you are not left to pay the difference out-of-pocket. Even if your policy uses Actual Cash Value (the depreciated value of damaged materials) to pay out, a recently remodeled kitchen will be much more expensive than the old one you replaced.
While spending long summer afternoons out by your very own swimming pool sounds like a dream come true, it can also be very expensive when it comes to your home insurance. Swimming pools come with considerable liability risks, as they can increase the risk that a guest could slip and get hurt on your property.
That injury risk could open you up to being sued. Liability insurance protects you from financial harm if someone sues you over an injury that they received while on your property.
Can Home Improvements Reduce Your Insurance?
Not all renovations are going to increase the coverage that you need to keep your home fully protected. There are some improvements that could reduce your premiums, as making them will reduce the risk that you need to make a claim in the future.
The single biggest renovation you can make to reduce your insurance costs is replacing your roof. You could potentially reduce costs anywhere from 5-35% if you replace your roof, while neglecting roof repairs could lead to an insurance claim getting rejected altogether.
There are other renovations that can reduce your premiums as well. Replacing old plumbing or electric systems will reduce the risk of a fire breaking out or damage from a leaking pipe. Both of these renovations can be expensive, but finishing them can go a long way toward reducing your insurance costs. There are some insurance companies that will not even offer coverage unless these renovations are completed.
One easier home improvement that you can make to reduce your insurance premiums is installing a security system. A security system can dramatically reduce your risk of theft, and it can get you a discount on your premiums.
Ask your home insurance company about the impact home improvements will have on your premiums. You can talk to your home insurance company about getting accurate coverage during and after renovations. Always make sure your property is properly covered in the case of a loss.