Home Renovations: 5 projects that increase your Home Insurance.

Home renovations can be a great way to build value in your home and make it your own. They also cause so many homeowners to be underinsured, meaning they will not be sufficiently covered should they have to file an insurance claim. Luckily for me (and you), I have a great Insurance partner here at Long & Foster, Susan Evans. Susan shared with me a shocking statistic: As many as 64% of homes are underinsured by an average of 27%.

After 2020, many of us improved our homes making them functional for our families and lifestyles. In fact, more than half of homeowners have made some improvements to their homes within the last year, 71% say that they will continue to make the same number of improvements going forward. If your plan is to start rolling paint rollers, and slinging sledgehammers, here are 5 renovations that will raise your home value AND your insurance rates.

(But first a tip: DON'T FORGET YOUR PERMITS!)

There is a saying: It’s easier to ask for forgiveness than permission.

This is not the case when it comes to permitting, nor does the office of permitting find that saying amusing. At all. whether you are having a contractor do the work or you're doing it yourself because you feel comfortable enough to do so after watching that youtube video..don't skip the permit.

Building a Pool

In certain locations, adding a pool to your home can increase its value and offer an incentive to would-be buyers. However, a pool is considered an “attractive nuisance” and increases your liability risk, which will likely increase your home insurance rates.

An insurer may recommend that a pool owner opt for higher liability coverage than what is standard. Homeowners might also consider purchasing an umbrella insurance policy, which provides additional liability coverage.

The insurer also may require a locking fence around the pool or a locking cover to go over the water when the pool is not in use. If the pool has a diving board or slide, it will likely be considered a greater potential hazard.

Adding an office for a home business

Working remotely is becoming more common, so adding an office could increase your home’s value for workers and home business owners. However, it could also increase your homeowners insurance rates or require you to purchase an additional insurance policy. Most homeowners policies protect equipment for home-based businesses up to about $2,500. That might not be enough for a business owner who uses specialized machinery or stores large amounts of supplies or inventory.

Expanding your space

Sometimes a home needs to grow to accommodate an expanding family. That can mean adding more livable square footage, such as in a basement or attic. In other instances, a new addition may be in order. Expanding your space with new square footage may increase your home insurance rates if you need to increase your coverage.

You might need more post-renovation insurance even if the added space is not inside your house. Adding a large finished deck could increase the value of your home, for example, and consequently, require an insurance reevaluation.

You may need to consider other types of coverage for the newly built areas of your home. A finished basement with new carpet, drywall, and insulation may need water backup coverage if the sump pump is located there, for example.

Ultimately, if you build to expand your usable square footage indoors or out, your insurance will need to be altered to account for the value of the new space.

Upgrading your kitchen or bath

According to the 2021 Cost vs. Value Report by Remodeling Magazine, a kitchen or bathroom remodel can provide upwards of 50% in recouped value. Suppose you make quality upgrades, like changing out laminate for granite countertops or having custom cabinets built. In that case, you may need to increase your dwelling coverage on your home insurance, which usually comes at an additional cost. If your home coverage is not enough to rebuild your new kitchen or bath, consider increasing the coverage to be in line with your upgrades. Let's say a "claimable occurrence" happens during or after your kitchen or bathroom upgrade. If your existing coverage is not sufficient, you may not be able to rebuild or repair your upgraded features.

If your contractor upgrades the home’s electrical or plumbing systems during a kitchen or bath renovation, you may qualify for a discount, which could offset any increase in your insurance rate. Not all improvements mean paying more for your coverage. In fact, some changes — like those plumbing or electrical updates — could mean paying less.

Renovations that lower home insurance rates

If you are making changes that make your home safer, like updated electrical or plumbing systems, you could see lower rates after you and your provider evaluate your home renovation insurance needs.

Renovating or replacing your roof

A new roof may not be the most exciting home improvement, but it can save you money when it comes to homeowners insurance. Upgrading old appliances, like the HVAC system, and replacing your roof usually means a reduction in premium because your home is better protected with new materials.

Do I need to increase my homeowners insurance after renovating?

Whether you need to increase your homeowners insurance after renovating depends on the coverage you already have in place and the value and type of the renovation. When you choose an insurance company, part of your insurance rate is established by your home’s square footage and the cost required to fix or rebuild it.

Thank you, Susan Evans, for all of this information. I'm sure some people had no idea that when renovating a kitchen there was more to consider than drawer pulls and backsplash tile.

So before you start tearing into walls consult your insurance provider.