In much of the country, summer means construction. If some of that construction is happening at your house in the form of a major renovation, you may need to update your homeowners insurance. Here’s a rundown of what you’ll need, insurance-wise, to make sure you and your property are adequately protected during the renovation process.
Adjustments to Your Existing Policy When You Renovate
There’s no such thing as home renovation insurance per se, but having your home renovated can change your risk exposures. That’s why it’s a good idea to talk to your homeowners insurance agent before breaking ground.
Depending on how you’re tackling the project, you may need to do two things:
- Update the coverage limit of your policy overall. If the renovation includes an addition or upgraded appliances, you may need to update the dwelling and personal property coverage limit on your policy to ensure that it will protect the new version of your home.
- Update your medical expenses coverage limit. If you’re doing the renovation as a DIY project with help from family members or friends who don't live in your home, talk to your agent about increasing the limit of the medical expenses part of your policy. This portion covers medical bills for injuries that happen on your property to people other than you and your family. A quick call with your agent should let you know whether you need to make any changes.
Additional Policies to Consider
In addition to potentially boosting your basic homeowners insurance, there are two other policies you may need during renovation.
The first is builder’s risk insurance, which covers the project in progress. This includes coverage for raw materials, the work completed so far, and any equipment being used. Builder’s risk insurance would cover losses related to, among other things, theft of materials from your driveway, vandalism of the new construction, fire damage to the materials or equipment, and more.
This policy usually comes with the same coverage limitations as a standard homeowners policy: flood, hurricane, and earthquake damage typically aren’t covered.
If you’ve hired a contractor to do the renovation, it’s best to include both yourself (the homeowner) and the contractor as named insureds on the policy. This reflects the reality that both of you have something at stake during the renovation:
- Your contractor wants a policy to protect their equipment and any interest they have in the materials.
- You want to protect your house and the addition as it’s being built in the event of a storm or theft.
- Both of you want to protect any work that’s been completed. If a fire burns down a half-completed renovation, for example, the contractor will want to be paid for redoing the work they already did, and you’ll want to get that money from your insurance provider rather than your bank account. You’ll also want money for replacement materials, which, again, would likely be covered by the policy.
The second policy to think about is one your contractor should carry: general liability insurance. This is a kind of business insurance that demonstrates to you that the contractor is financially secure. If something were to go wrong during the renovation process and you chose to sue the contractor for damages, the general liability policy would pay the contractor’s legal costs, including any settlement or judgment against them.
In other words, a contractor with a general liability policy is a much better financial risk for you than one who isn’t insured. If you’re planning to work with a contractor, ask to see proof of their insurance. Verify that this insurance is active and will be active for the duration of your renovation.
When in Doubt, Call Your Insurance Provider
No two homes are alike, and no two renovation projects are, either. If you’re not sure how your insurance will need to be adjusted for a remodeling project, reach out to your insurance provider to see what it recommends.