One of the biggest perks of homeownership is having the opportunity to build equity. Home renovations can not only improve the experience of living in your home, but can also dramatically increase its value.
Unfortunately, however, some renovations might raise your home insurance rates, which might put some extra stress on your bank account. Let’s look at some common home renovations that could raise (or lower) your home insurance premiums, and talk about how you can compare homeowners insurance to get the best coverage possible.
When thinking about the impact home renovations could have on your homeowners insurance, it’s important to remember that insurance companies are primarily concerned with two things: the risks involved in providing coverage, and how much they’ll have to pay out in case of a claim.
For example, expanding the space of the house, such as adding a second level, is literally increasing the amount of material the insurance policy will have to cover — and your premiums will likely go up as a result.
Another common example of a renovation that can increase your insurance rate is building a swimming pool. Pools dramatically increase the risk of accidental injury or drowning, and while they can add value to the home, they also represent an increased liability risk, which means most insurance carriers will charge you more for the privilege.
Adding a home office can also raise your insurance premiums, even if you don’t add on a new room to your house. The reason? Having a lot of expensive business equipment in your home office may require additional coverage in order to make sure you’re protected. This is why it’s important to keep your insurer informed of any major changes in your home situation (more on that later).
Even upgrading your kitchen or bathroom with new fixtures can also bring up your insurance rates, particularly if you use premium materials and install expensive new appliances. As with other value-raising assets, this often means more coverage to account for the increased value of the home.
While it might seem like any home improvements you might make just add more to your insurance bill, that’s actually not the case. There are a lot of home renovations that will reduce the risk to your insurance carrier and bring your premiums down.
For example, replacing an old or damaged roof will actually help secure your home against future water damage, which is a much more expensive proposition than just having a new roof in the first place. As a matter of fact, rebuilding your roof with sturdy, high-quality materials can help safeguard against wildfire or wind-related damage, which is good news for insurers (and your bank balance).
Similarly, reinforcing your home against the weather with storm windows, or upgrading the fire system (such as installing automatic sprinklers), will also reduce the risk of severe damage to your home in case of disaster. The same goes for upgrading your electrical and plumbing system — these sorts of improvements help mitigate or prevent future damage, making them a cost-saving measure in the long run.
If you’re a homeowner, you already know renovations can be an expensive proposition. You might be wondering if your insurance company can help pay for some of those renovations, and the answer is: it depends.
If the improvements you’re making contribute in some way to mitigating or minimizing risk of damage to the home — such as the improvements described above — then your insurance company may help pay for it. At the end of it all, however, you may have to reassess your coverage levels to make sure all your renovations are sufficiently protected.
On the other hand, if the renovations you’re making are strictly aesthetic, such as approving the look of the home, then your homeowners insurance will almost certainly not cover it.
Whatever improvements you make, make sure to inform your insurance company. If you don’t, they may not pay claims related to these new upgrades. Always keep your insurer in the loop.
As a homeowner, you’re probably always on the lookout for ways to make home ownership cheaper. With that in mind, here are a few ways you might be able to bring those premiums down.
One of the best ways to do this is to shop around and compare homeowners insurance quotes. Kristine Lee at The Zebra has a list of tips on how to make the most of your comparison shopping.
You can also make your home more secure by installing a home security system and features such as automatic lights.
Also, don’t be afraid to ask your insurer about some lesser-known discounts you might be eligible for. You might also look into improving your credit rating and consider bundling your auto and home insurance together for extra savings.