How renovations impact your home insurance

Renovating your home can increase its value and functionality, but it can also complicate your homeowners insurance. Before you start adding a room, installing a swimming pool, updating your kitchen, or finishing your basement, you should be sure you understand how your insurance policy applies during a remodel. Failing to notify your insurer or make proper adjustments could leave you vulnerable to uncovered losses.

Here’s why and how a renovation project can impact your insurance coverage. 

Increased rebuild cost & coverage limits

Renovations typically increase the value of your home and, with it, the cost to rebuild. If your policy isn’t updated to reflect new square footage, high-end appliances or materials, or structural changes, you may be underinsured in the event of a fire or total loss. 

Many policies base coverage limits on the replacement cost of your home, so a major renovation often requires a coverage reassessment. 

Added liabilities & injury risks

Construction zones come with heightened risks. If a guest trips over exposed electrical wiring or your dog bites a contractor, you could be held liable. Renovation projects increase the likelihood of personal injury claims, making it important to ensure your liability coverage is sufficient before construction projects begin. 

What your homeowners policy typically covers during renovations

Homeowners insurance can provide some coverage during home renovation projects, but there are limitations. Here’s a breakdown of what’s usually covered when your home is under construction.

Damage to existing structure

A standard home insurance policy typically covers damage to the existing structure for covered losses, such as fire, theft, and damage from storms like hurricanes or tornadoes. However, it may not cover the new addition, construction materials, or building work in progress without a specialized policy or coverage.

Personal liability & medical payments

Your policy usually includes personal liability coverage in case someone is injured on your property. It covers guests and, in some cases, contractors. It also may cover medical bills for minor injuries, regardless of who is at fault.

Personal property losses

If your furniture, electronics, or other personal belongings are damaged during the remodel (for example, due to dust, water, or a construction error), if damaged by a covered peril, your personal property coverage may kick in. However, coverage limits and exclusions can vary, especially if items are moved off-site during the renovation. 

What’s usually not covered 

Though some aspects of your home improvement project are covered, some key elements may not be without additional coverage, like the renovation itself and your contractor’s liability and tools.

The renovation itself

A standard homeowners insurance policy usually won’t cover the actual renovation work or materials until the project is complete. That means cabinets, flooring, or drywall might not be covered during construction, whether they’re waiting to be installed or newly installed. 

To have renovation coverage, you’ll likely need a separate builders risk insurance policy. To be sure what is and is not covered, read your policy carefully and speak with an insurance agent if you have questions.

Contractor liability & tool insurance

Your homeowners insurance might not cover your contractor’s tools, vehicles, or employees. If a contractor’s ladder falls and injures a worker, the contractor’s own workers’ compensation and general liability insurance should apply. 

Again, your policy may differ. Speak with your agent as needed to gain clarity and fill coverage gaps.

How to prepare before renovations begin

1. Notify your insurance agent early. Share the scope of work, budget, and timeline of your project. Your insurer may suggest policy changes, temporary add-ons, or recommend separate builder’s risk coverage to protect against the worst-case scenario.

2. Update your home inventory. Take photos and list valuable items in case of damage or loss during the remodeling process.

3. Secure high-value items. Consider moving jewelry, artwork, sentimental items, and sensitive documents to a safe location or off-site storage.

4. Review policy exclusions. Understand what types of damage or theft are not covered during the renovation period. 

Steps to take with contractors

Your contractor plays a major role in the success of your renovation project. Make sure you understand who is responsible for what, and verify that the professionals you hire are fully insured and licensed in your state.

Confirm contractors’ insurance & credentials

Request a certificate of insurance (COI) from every contractor and subcontractor working on your home. Ensure they have:

• General liability insurance

• Workers’ compensation coverage for their employees

• Appropriate licenses and bonding

This protects you from potential lawsuits or damages related to their work that your insurance policy doesn’t cover. 

Clarify who buys builder’s risk coverage

Builder’s risk insurance covers equipment, materials, and the new construction itself while work is in progress. Sometimes, it’s the contractor’s responsibility; other times, the homeowners must purchase it. 

Be sure this is clearly outlined in your contract to avoid a coverage gap. If your contractor is responsible, don’t forget to ask for a COI.

Document contracts, timelines, permits

Get everything in writing, including:

• Detailed contracts

• Projected start and end dates

• Proof of building permits

• Payment schedules and warranties
  Proper documentation not only protects you legally but can also help settle disputes with insurers if a claim arises during the renovation. 

Post-renovation insurance checklist

Once the dust settles, don’t forget to update your insurance coverage to reflect your new and improved home. Use this checklist to make sure you’re fully protected and not paying for unnecessary add-ons.

Reassess insurance after project completion

Once renovations are complete, update your insurance policy to reflect the increased value of your home and contents. Provide all the details of your new home and upgrades to your insurance agent so they can create a new home valuation and adjust coverage limits accordingly. It ensures your new kitchen, added square footage, or luxury fixtures are fully covered moving forward. 

Switch off temporary riders

If you added a renovation-specific rider (optional added coverage type) or builder’s risk policy, confirm when it ends and remove it from your policy after the work is completed. This helps avoid unnecessary insurance premiums. 

Maintain upgraded safety features

Many renovations include safety upgrades, such as a new roof, improved wiring, or modern plumbing, which can help reduce your home insurance premiums. Make sure to notify your insurer of improvements that may qualify you for discounts while you’re updating your home’s value and coverages.