With today’s housing market creating supply and price challenges, remodeling has become very popular. There are lots of details to consider in the remodeling process. However, there is one detail that many people overlook: insurance implications.
A typical home owner’s insurance policy covers the owner for covered losses that have occurred during normal ownership and residence in the home. Once that home becomes a construction zone, typical policy coverage has limitations that can cause both financial and emotional grief to the owner if a loss occurs during the process.
When remodeling your home, it’s easy to get wrapped up in design choices and construction details, but it’s critical not to overlook the insurance implications. Here are some important considerations to keep in mind:
1. Notify your insurance company
Early notification: Inform your insurance company before starting major renovations. This ensures that your policy remains valid and that you are covered for potential issues that may arise during the renovation process.
Scope of work: Provide detailed information on the scope of the renovation. This helps the insurer understand any increased risks and adjust your policy accordingly. It also gives them an opportunity to explain the limitations of coverage during construction.
2. Review coverage limits and exclusions
Policy Limits: Check if your current policy limits are sufficient for the increased value of your home after renovations. An increase in the value of the home usually requires an update of the coverage limits.
Exclusions and limitations: Be aware of any exceptions in connection with construction or renovation work. Some policies may have specific exclusions for damage that occurs during renovations or may limit coverage for certain types of work.
3. Consider Builder’s Risk Insurance
Specialized coverage: In the case of significant alterations, builders risk insurance (also known as building insurance) may be necessary. This policy covers damage to the property during the renovation period and often provides broader coverage than a regular homeowner’s policy. Theft of materials used during construction, which is the biggest loss during construction, is typically covered by a Builders Risk policy.
4. Understand Vacant Clauses
Occupancy status: If your renovation work means you cannot live in the property, check the idleness clause in your policy. Many policies have restrictions on cover if the home is unoccupied for a long period of time.
5. Protect your property and your liability
Property protection: Make sure your policy provides adequate coverage for potential damage to the property, whether from accidental damage during construction or other unforeseen events.
Liability coverage: Confirm your liability coverage is adequate in the event of accidents involving contractors or site visitors.
6. Document everything
Before and after pictures: Before and after the renovation, you must keep detailed records of the condition of the property. This can be useful if you need to file a claim in connection with the renovation.
7. Consult your insurance advisor
Expert advice: While this should be the first point, discuss your remodeling plans with your insurance advisor to ensure all aspects of your policy are addressed. They can provide guidance on adjusting your cover and any additional insurance needs.
By addressing these insurance considerations, you can focus on the excitement of remodeling while protecting your investment and avoiding unexpected setbacks.
