Remodeling Your Home

Home remodeling is making a comeback – studies estimate that Americans will spend $340 billion on home remodeling in 2018. But during this fix-up frenzy, many homeowners will be exposed to financial risk.

One-in-four home remodeling projects increase the value of a home by more than 25%. But too few consumers consider increasing their homeowner’s insurance limits to reflect their home’s increased value. This means you could be underinsured.

According to a recent survey, 60% of homeowners who recently made major structural changes to their homes – such as bathroom or kitchen remodels, additions, decks or patios – have not updated their homeowner’s policies.

Many homeowners insurance policies include a dwelling replacement extension that provides additional coverage if the cost to rebuild your home exceeds your dwelling coverage limit. The extension could be 25%, 50%, or more. Policy language in these extensions requires you to notify the insurance company if the improvement increases the replacement cost by more than 5%. This means that in order for these extensions to be effective at the time of loss, you must update the insurance company with regard to home renovations.

Some policies offer discounts if you install a new roof, upgrade electrical service, replace older plumbing or install a new furnace. Your project may earn you some of these discounts.

We offer the following tips for protecting your home:

• Make an insurance review an essential part of any home remodeling plan. Contact your agent before you begin any work.
• Request a copy of the contractor’s certificate of insurance from his/ her insurance agent, including certificates from any subcontractors used by your contractor, and share them with your agent for his/her insight specific to your home to determine any exposure.
• Always check with the Better Business Bureau when selecting a contractor and follow up with references provided by the contractor. Inquire if the contractor is registered as required by the Pennsylvania Attorney General.

Always establish responsibility for uninstalled appliances, cabinets, carpet and other items in advance; the contractor should have a builder’s risk policy or installation floater to cover these items.
If you plan to leave your home during remodeling, you could be jeopardizing your homeowners insurance if you are gone for more than 30 days. Most policies have vacancy clauses that vary from company to company, so be sure to check your policy. You can purchase a vacancy endorsement if needed.