Renovation and Risk: Insuring Your Improved Home

Planning a home renovation project is exciting and sometimes stressful, with so many choices to be made: cabinet styles and finishes, flooring, countertops, hardware, paint … the list goes on. Many people miss one very important step, however … your homeowner’s coverage may need a little improvement as well.

First, begin with the end in mind: experts estimate that 1 in 4 remodeling projects adds at least 25 percent to the value of a home. If your policy is still covering the unimproved value, you might have a big problem down the road. Raise your policy limit to an appropriate level before the work begins.

This is especially true if you’re adding to the existing footprint of the home. That addition means more square footage than before, which by itself will dictate a coverage increase, but might also affect your liability exposure by adding new exterior entrances, stairs and so forth.

Beyond your homeowner’s policy, there are other insurance considerations in any renovation. If you’re hiring a contractor to do the work, start by hiring a reputable one. Unlicensed or disreputable contractors are much more likely to lack required insurance coverages, leaving you at risk if there’s damage or injury as a result of the work.

In your discussions with contractor candidates, ask to see a current Certificate of Insurance which will show proof of current workers’ compensation coverage, general liability coverage (for the purposes of your project you will want to be named as an “additional insured”), and in some cases, builders risk coverage. The latter covers damage to your home and to project materials, including those not installed yet. Builders risk is not a necessity for every project; we can help you to determine that in your specific case.

If you decide to do the work yourself, or to manage subcontractors without a general contractor, guess who assumes all the risk? (Hint: grab a mirror.) Make sure every single subcontractor can demonstrate current workers’ compensation and general liability coverage, and review your own coverages as well. If not, you could be subject to workers’ compensation laws if anyone is hurt.

The story changes a bit if a friend or relative is injured in the course of assisting you with the work. That circumstance is typically covered by your homeowners insurance, up to your policy limits. Still, it’s a good idea to carry umbrella liability coverage, which provides protection beyond those policy limits.

Your new kitchen, bath or addition is a big investment, and should bring you years of enjoyment. Take the right steps before you begin and sleep better knowing that your investment is properly protected.  Contact Consolidated for a homeowner’s insurance quote or if you have any questions about insurance while you’re renovating.