Understanding the Impact of Home Renovations on Your Home Insurance

Home renovations are exciting, whether it’s a small upgrade or a major overhaul. While enhancing your home’s aesthetics and functionality, it’s crucial to consider the implications these changes might have on your home insurance. Renovations can significantly impact your coverage, and being aware of these changes is key to ensuring adequate protection for your property.

Assessing Changes in Home Value:

One of the primary impacts of renovations is the alteration of your home’s value. Improvements like adding a new room, renovating the kitchen, or upgrading bathrooms can increase your home’s value. It’s essential to inform your insurance provider about these changes as they might affect the coverage limits required to adequately protect your property. This will depend on how your insurance policy works:

• Sum Insured – if you had to provide an estimate for the rebuild value of your property when you took out your policy, then it’s called a Sum Insured policy. You only have cover for the amount you set, and when a renovation may increase this value you’ll likely need to increase your cover
• Bedroom Rated – if you didn’t have to provide a figure, then it’s likely your policy is priced based on the number of bedrooms in your home. If your renovation added or removed a bedroom, then you’ll need to update your policy to make sure it’s accurate for your new situation. Remember that you’ll usually have to declare rooms that were originally built as bedrooms or are being used as bedrooms (or alternatively, how many you would list it on the market for if you were selling the property)

Impact on Coverage Needs:

Renovations that increase the value of your home might necessitate adjusting your insurance coverage. Failure to update your policy to reflect the increased value could leave you underinsured in the event of a loss, as standard policies might not cover the full cost of these new enhancements.

Types of Renovations and Insurance Implications:

Structural or larger changes:

• Expanding the square footage or altering the structure can impact insurance. Notifying your insurer about structural changes is crucial to ensure they’re included in your coverage. Typically these types of changes (ones that affect the key structure of the property, expose it to possible damage such as removing the roof, or compromised security such as removing key walls or windows) will limit your home insurance coverage while the project is going on to account for the increased risk. Any restrictions will be lifted once the work is completed, so make sure to keep your insurer updated when works start and finish.

Redecorating or smaller changes:

• Where renovations don’t stretch as significantly as those in the previous point, then there likely won’t be any limitations or temporary exclusions put in place. However, that doesn’t mean that they can’t have an impact on your insurance needs. Adding in furniture or fittings to a room may increase the amount of coverage you need for buildings and/or contents. And if you’re buying any particularly valuable pieces, then you might need to specify these on your policy.

Home Security Upgrades:

• Installing security systems or smart home features can reduce the risk of burglary or damage, potentially leading to lower insurance premiums. This won’t be the case with every provider, but it’s best to let them know regardless of an impact on price.

Home Renovations and Liability:

While enhancing your property, renovations can also introduce liability risks. Contractors and workers on-site could face accidents, leading to potential liability claims. Ensuring your contractor has adequate insurance coverage can mitigate these risks. Additionally, reviewing your liability coverage with your insurer can offer peace of mind during renovation projects.

Steps to Take When Renovating:

1. Notify Your Insurer:
   Inform your insurance provider before starting renovations. Discuss the scope of the project and how it might impact your coverage needs.
2. Review and Update Coverage:
   Work with your insurer to reassess your coverage limits based on the renovations’ added value.
3. Document Changes:
   Keep records, receipts, and documentation of the renovations. This information will be valuable when updating your policy.
4. Check Contractor Insurance:
   Ensure your contractors have adequate insurance coverage to protect against liabilities arising from the renovation work.

Home renovations can significantly enhance your living space, but they also warrant a re-evaluation of your home insurance. Failing to update your policy to reflect changes could result in being underinsured or facing coverage gaps.

Regular communication with your insurance provider, understanding policy implications, and timely updates will ensure your home remains adequately protected as it evolves with your renovations.

Remember, a well-informed approach to insurance during renovations can save you from potential financial risks and provide peace of mind to fully enjoy your improved home.