Does my homeowners insurance policy cover renovations?

The pandemic has given homeowners plenty of time to take on home renovations. Homeowners with increased savings and plenty of time on their hands has led to a dramatic increase in home projects this year. According to a recent Bank of America survey roughly 70% of Americans decided to start on a home improvement project last year.

“With the pandemic, we have seen an increase in homeowners using our projects tracking features,” said John Bodrozic, co-founder of Home Zada, a homeownership data analysis platform in a recent Fox News article. “The most common projects are kitchen and bathroom renovations which fall into a major home improvement. The next level of projects is more of flooring and painting projects which fall into minor level renovations,” continued Bodrozic.

If you are considering a remodel to your home, it’s always a good idea to consider the impact your project will have on your homeowners insurance premium. Depending on what type of project you are tackling, your premium could be headed up, stay the same or in some cases go down. 

Let’s have a look at how homeowners insurance can be impacted by renovations.

Does my homeowners insurance policy cover renovations?

While your homeowners insurance will protect your renovations with coverage once they are done, homeowners insurance does not pay for the cost of the renovations. Homeowners insurance is designed to cover costs related to sudden and unforeseen accident that causes damage to your home. It doesn’t pay for home improvements or renovations. 

Will my home renovations increase my premium?

It really depends on the type of renovation you are doing when it comes to a premium increase. While some renovations will absolutely increase your insurance cost, others will have little or no impact. In some very specific circumstances, as an example, you are installing a sprinkler system in your home, you may actually see a lower premium. 

A few home renovations that will increase the cost of your homeowners insurance:

• Putting in a pool:  A pool is a huge risk to insurers so expect a major premium increase after your pool is installed. 
• Putting in a home office: If you increase the square footage of your home while putting in a home office your premium will be certainly be headed up. Even if you don’t expand the size of your home, the increased foot traffic to your home office can be a liability risk resulting in a higher premium.
• Putting on an addition: If you are adding square footage to your home, you will be paying a higher premium. Your insurance company is on the hook for rebuilding your home if it is damaged or destroyed and increased square footage will increase your rebuilding cost.
• Kitchen renovation: A serious kitchen renovation can involve new appliances, cabinets, flooring, as well as other upgrades. This can dramatically increase your repair and rebuilding costs, which will result in a higher premium. 

These home renovations could actually result in a lower premium:

• New roof: If you replace your current roof with a wind or hail resistant roofing material, you could see a decrease in your premium. Insurance companies offer discounts for impact resistant roofs, particularly in areas where severe weather is common.
• Rebuilding a deck: If your current deck is rotting or in general disrepair, repairing or replacing the deck may result in a lower premium. Insurance companies are happy whenever homeowners remove risk from their home and replacing a shoddy deck is a great way to lower your homes liability risk.
• Security system: If you are installing a new security system or updating an old one your insurer will usually offer a discount, lowering your premium. 
• Updating mechanicals: If you are in an older home, updating your mechanicals (water heater, HVAC) wiring and plumbing can result in a significant discount on your premium. 

In most cases, the following renovations will not impact your premium at all:

Painting: Painting your home, regardless of whether it’s interior or exterior will rarely have any impact on your insurance premium.

New carpet: In most cases replacing your carpet will have little impact on your premium. However, if you are pulling out all of the carpet in your home and replacing it with wood floors this could impact your premium as your rebuilding cost would increase.

Other minor renovations: if you are simply making minor renovations such as putting in a backsplash in a kitchen or replacing a laundry tub in the garage, you should not see a premium increase. If you are unsure how your renovation will impact your insurance rates it is always a good idea to contact your insurer before starting any work.