Life is complicated, insurance doesn't have to be.
Read time: 4 minutes
With the growth in construction, it’s no secret that the
pandemic has inspired more than a few home improvement projects.
But, what if we told you that those projects did more than
improve your attitude about being home?
They potentially changed your homeowners insurance needs.
When you complete home improvement projects, you need to tell
more than your family, friends and social media followers.
Your insurance agent is actually one of the first people you
Specifically, you need to tell your agent about home
improvement projects that potentially add value to your house.
Here are just some of the home improvement projects you
should consider discussing with your agent:
How do home improvement projects affect my homeowners insurance?
The main way home improvement projects may affect your home
insurance is they can change the cost to rebuild your house. And that
is a big deal. After all, it’s the main reason you have an insurance
policy for your house: To repair or possibly rebuild your house in the
event of a disaster (based on the coverages purchased).
Insurance companies often provide coverage based in part on
the cost to fully rebuild your house in the event of a loss. Some
policies provide coverage on an actual cash value (ACV) basis. ACV
is based on the age and condition of the property at the time a loss happens.
The cost to rebuild your house is called replacement
cost. When you have a policy that pays on a replacement cost
basis, we want to insure the full cost to rebuild your house. Not
necessarily what it may sell for, but what it would cost to build it new.
How to Select the Best Homeowners Insurance
Let’s look at an example.
Sam buy a house. Two years later, they decide to add a
garage. Later that summer, a strong storm comes through and a
large tree falls on their house.
Unfortunately, Dominic and Sam didn’t tell their agent about
the garage they built. So, their insurance will likely only
cover up to the limit of insurance they purchased, even if
the cost to rebuild with the garage is higher than that limit.
This may leave them footing part of that repair bill.
and Sam told their agent about their new garage, their
insurance would have been adjusted to have adequate limits to
rebuild their home the way it was when the loss occurred.
There are also endorsements or amendments to policies that
cover increased costs in construction. This may help in a situation
similar to our story above. However, even these endorsements may
have provisions stating that you must notify your agent if any
combination of home improvements will exceed a certain percentage of
the replacement cost of your home.
Moral of the story: tell your agent about your home
The policy limit you originally selected for your homeowners
insurance may not be high enough after your home improvement project.
Your insurance company will only pay the limit shown on your policy.
Talking to your agent to reassess your policy may save you and your
budget a lot of grief later.
Large updates can change how you’re compensated for a
There are some situations that a home improvement project may
actually change how we can compensate you in the event of a covered
loss. While most homeowners policies have replacement cost, there may
be parts of the home that are only insured for actual cash value, such
as your roof. In the case of roofs, this is dependent on the age of
Homeowners Insurance and Roof Storm Damage: 5 Things You Absolutely
Need to Know
For example, if your roof is 20 years old, it may be insured
at actual cash value. However, if you recently replaced it, you may
qualify for replacement cost on your roof. Telling your agent about
the update helps ensure your policy is written with the best coverage possible.
It can warrant a change to your home insurance policy’s limits
When you bought home insurance, you selected limits of
coverage. Limits are just what they sound like. Your policy will
cover up to a certain dollar amount of damage. Different coverages
within your policy have their own limits.
For example, your personal liability coverage within your
home insurance has varying limits you select at the time of
purchase. Liability coverage protects you if somebody makes
a claim against you or another insured because of an injury,
property damage or other covered loss.
So, if you added a pool, your agent may advise increasing
your liability limits because of the risk of potential injuries and
having more people over to your house to swim.
If your home improvement project was building a pole barn or
a garage, your other structures coverage limit may need to increase.
While these may seem like small adjustments, they can be the
difference between being adequately insured or underinsured.
7 Things Nobody Tells You About Homeowners Insurance
Are there other situations I may need to talk to my agent about?
Besides major home improvements, there are other reasons to
talk to your agent. Many homebuyers typically think once they buy
their home, and get insurance, they’re done.
But there are actually lots of other changes that may need to
be discussed with your independent agent to make sure your
homeowners insurance policy is up to date.
Examples of these changes may include:
What is an Independent Insurance Agent?
Another aspect of your home that may change over time is the
contents inside. It’s a good idea to keep an up-to-date home inventory
to document the items in your home. Several free apps can help you
capture the information quickly.
As your home and family change, tell your agent. This will
help make sure you still have the best coverages for your home
*Products referenced may not be
approved/available in all states. Limitations and conditions
may apply. Premium will be based on benefits chosen and
policy rates available at time of application.
Disclaimer: This article is not expert advice. The
analysis of coverage is in general terms and is superseded
in all respects by the Insuring Agreements, Endorsements,
Exclusions, Terms and Conditions of the Policy. Some of the
coverage mentioned in this material may not be applicable in
all states or may have to be modified to conform to
applicable state law. Some coverages may have been
eliminated or modified since the publishing of this
material. Discounts may not be available in all states.
Limitations and conditions may apply. Premiums will be based on
benefits chosen. Please check with your local Independent
Auto-Owners Insurance Agent for details."
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