- Homeowners insurance can help protect you financially from things like injuries and theft during a major renovation.
- But it generally won’t cover materials and labor costs, unless renovations are a result of a covered loss.
- Your contractor should have insurance coverage as well.
In a perfect world, your homeowners policy would fully cover the cost of a big home renovation. Large bill for marble countertops? Submit it for reimbursement. New light fixtures throughout your home? Send the bill to your insurance company.
We hate to burst your bubble, but home renovation costs generally aren’t covered by insurance. So you’ll likely be on the hook for the bills for both materials and labor.
Even though renovation costs aren’t usually covered by insurance—except in the case of damage caused by events like a fire, tornado, hurricane or falling tree—there are some essential things to know about how a major home project can impact your coverage.
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Are homeowners insurance coverage adjustments necessary?
If your renovation is simply something you want to do, rather than something you need to do as a result of a natural disaster, it probably won’t be covered. But it could still impact your coverage.
Before a major remodeling project, you may want to consider adjusting your homeowners insurance coverage. While homeowners policies typically come with a set level of liability and personal property insurance, increasing these coverages before you renovate could be a good idea.
Whether you need to make adjustments depends on your project, but experts suggest looking closely at your coverage levels. “You certainly don’t want to be underinsured,” says Evan Walker, a personal injury and property damage attorney. “Before renovation, review your policy to ensure changes brought about by the renovation are covered. Look at both property damage and liability coverage. Both could come into play during renovations.”
During construction, there are power tools, building materials and sharp objects everywhere, which means the potential for injury is real. And if you’re planning to tackle any renovations or projects yourself or with a friend’s help, make sure you have adequate liability and medical payments coverage in case someone gets injured. Contractors you hire should have their own insurance coverage if a worker gets hurt on the job or if your home is damaged as a result of their work, which we’ll discuss shortly.
Personal property coverage
While you hope it won’t happen, expensive items could accidentally be damaged during a home remodeling project. There may also be several strangers in your home at a given time, so unfortunately, there’s the potential for theft as well.
Check your coverage levels prior to your renovation project to make sure you’re protected in case the unexpected happens. Talk to your insurer about your plans and insurance needs, and supplement as needed if your current coverage levels fall short. You may also want to add a dwelling under construction endorsement if you’re putting on an addition, as this could provide coverage for the new space.
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What insurance should your contractor have?
Any contractor you hire should be licensed and insured. Be sure to ask which types of insurance they have as you’re shopping around for quotes. Ideally, you’ll want to choose a professional contractor who holds both workers’ compensation coverage and commercial liability insurance.
Workers’ compensation helps cover costs if one of your contractor’s workers is hurt on the job. So if someone misuses a power tool and gets injured, for example, their medical costs and a portion of lost wages would generally be covered by worker’s compensation.
Commercial liability coverage helps protect your contractor’s business if they’re found legally liable for property damage or an injury. This type of coverage can cover expenses related to damage in your home, customer medical costs and legal costs if the contractor is sued.
Your contractor may also have builder’s risk insurance: This coverage offers protection if materials or tools are stolen or your home is vandalized during the renovation.
What types of renovations impact home insurance costs?
Different types of renovations can impact your home insurance costs in different ways. For instance, if you install a top-of-the-line home security system, your homeowners insurance premiums might decrease. Discounts may also be available for certain improvements, like installing a new roof or upgrading an old electrical system. Talk to your insurer to determine if you could save on your coverage due to your renovation.
While certain renovations might decrease the cost of your homeowners insurance coverage, others may increase the cost of your premiums. For instance, if you put a new addition on your home or upgrade your bathrooms, you might need to up your coverage levels. This is because the new space won’t be covered by your old policy, or the cost to replace materials in your home will likely increase. You might end up underinsured if you rely on your old policy.