Do Renovations Impact Home Insurance Rates

Do Home Renovations Change Your Insurance Rates?

There are numerous reasons why you might want to undertake a home remodeling project.

You might want to add more living space or increase the value of your home. It could also be as simple as giving a much-needed makeover to a specific room or corner of your home.

But did you know that some home improvements can actually raise your home insurance? Continue with us as we discuss which ones will fill your wallet rather than drain it, and when you'll need to increase your home insurance limits to properly protect it.

Renovations That Increase Home Insurance Rates

Some renovation projects raise the cost of rebuilding your home, which means you'll need more homeowners insurance coverage to be fully protected. The following are some of the home improvements that may raise your monthly premiums (and why):

Building a swimming pool: It goes without saying that a pool can transform even the most ordinary home into a hot property for potential buyers. However, insurance companies are not always on the same page. To them, a pool increases liability risk significantly, prompting them to raise your premium. Most homeowner's insurance policies include liability coverage, which will help cover medical bills if someone is injured on your property and sues. However, depending on the liability coverage limit, which varies by carrier, these policies may not provide adequate protection. Furthermore, a pool can pose a significant risk, particularly for families with young children or those who enjoy hosting parties and gatherings. That is why it is prudent to include an umbrella insurance policy, which will provide additional liability coverage for greater financial security.
Adding an office for a home business: Since most of us work from home part-time, if not full-time, it's important to have a dedicated space for it. However, your insurance rates will almost certainly rise as a result. Depending on the nature of your business, you may be required to purchase one of the following for additional protection:
Endorsement to your current homeowners policy: A standard insurance policy covers your home-based businesses up to $2,500 in damages. However, if you use specialized machinery or keep a large amount of inventory or supplies at home, this may not be sufficient. An endorsement, on the other hand, will increase the coverage limits for your equipment and business-related assets.
Policy for business owners: If your homeowner's insurance policy does not cover business liability, you should consider purchasing a separate policy designed specifically for insuring a business. This is a good option for home-based business owners who have a lot of foot traffic, such as music teachers or massage therapists.
Home-based business insurance: This coverage provides the same protection as a larger company, but with lower policy limits and premiums. Be aware that some carriers may include a business personal property exclusion in their home insurance policy. If you have work-related items in your home, you should contact your insurer to ensure that you have adequate coverage.
Increasing your living space: Adding livable space to any home, regardless of size, can make it more appealing to you and potential buyers if you're looking to sell. This could include adding an in-law suite, finishing a basement or attic, or expanding the kitchen. The only disadvantage is that it will usually raise your insurance rates because you will require a higher level of dwelling coverage. If the space is not inside your home, you may require additional post-renovation insurance, such as adding a bedroom above the garage, which would necessitate an insurance reassessment.
Upgrading your kitchen or bathroom: If you are upgrading your kitchen or bathroom with expensive materials or updates, you may need to increase the dwelling coverage on your home insurance, which usually comes with an additional premium cost. Upgrades such as granite countertops or wood flooring, custom cabinets, or swapping out old appliances for new built-in versions are some examples. If your current coverage is insufficient, you may have to pay for some of the damages to your kitchen or bathroom after a covered loss out of pocket.

Renovations That Lower Home Insurance Rates

Are you ready for the good news? If you plan to make safety improvements to your home, your insurance company will reward you with lower insurance rates. Here are some renovations that are certain to lower your monthly premium.

Roof renovations or replacement: Your roof has the greatest impact on your homeowners insurance rates. Replacing an old roof with a new one means your home is better protected, which can result in a significant reduction in your insurance rate. If you use special loss-mitigation measures, such as hurricane straps, waterproofing, or impact-resistant shingles, you can save even more.
Upgrade your home systems: If you upgrade your wiring, plumbing, or HVAC systems, especially if they are older or no longer meet current building codes, you could save a lot of money on your insurance. What you'll need to do is as follows:
Upgrade your electrical wiring to copper. Rewiring a home can be costly, but it reduces the risk of fires and electrical damage caused by outdated aluminum or knob-and-tube wiring.
Replace aging pipes: If you have lead or polybutylene pipes in your home, it will be difficult to find insurance coverage. Upgrade to modern plumbing hardware, such as cast iron, copper, or PEX, to reduce the risk of water damage while also lowering your insurance premium.
Install a new HVAC system or water heater: Aside from lowering your insurance premium, modern HVAC upgrades are also safer. Choose eco-friendly upgrades like solar panels, heat pump water heaters, or Energy Star appliances to save even more money.
Install a security system: When it comes to home security, no precaution is too minor. Installing deadbolts, fire alarms, and sprinkler systems is a simple way to give yourself peace of mind while also lowering your insurance rate. However, the amount of your discount is determined by the quality and effectiveness of the protective device. For example, if you install a local alarm system that alerts you in the event of an intruder, you may be eligible for a small discount. However, if your alarm system automatically alerts police or a central dispatch team for multiple incidents such as fire and burglary, you will receive a larger discount.
Invest in smart home tech: There are numerous smart home tools and devices available that can help you save time and make your home safer. Smart locks, water leak detection systems, and gas leak or freezing pipe sensors are all ways to alleviate some daily concerns while increasing home security. You'll also see a reduction in your insurance rates as a bonus.

The Bottom Line

Another thing to consider is that homeowner's insurance rates have risen significantly since the pandemic. The price increase can be attributed to supply-chain issues, labor shortages, and inflation, but longer-term trends can also influence rates. That is why any renovations or additions must be reported to your insurer. They will assist you in updating your policy to reflect any changes in the replacement cost value of your home, ensuring you have enough coverage to pay for a full rebuild in the event of a disaster.