Home Insurance After Renovations: Impact on Premiums & Coverage

Even if you’re doing DIY renovations and not hiring any outside help, you may need to tweak your home insurance during and after renovations to reflect the update. In some cases, your home insurance premiums may increase but in other cases, you’ll be awarded a lower rate due to the changes you made. Tell your insurance company about any changes you plan to make so you’re not in for any surprises if you file a claim. You may need renovation insurance, too, in case something goes wrong during construction. Here’s everything you need to know about home insurance for renovations.

Key Takeaways Your renovations may increase the value of your home and rebuilding costs a lot or a little, so adjust your limits accordingly. How much you increase your home value and rebuilding costs will determine your premium and coverage needs. You may save money by upgrading your home with increased safety and fire protection.

Do Home Renovations Impact Home Insurance Rates?

In some cases, your home insurance after renovation may increase if the upgrades increase the rebuilding cost of your home and your personal property coverage if you buy new appliances. However, your rate may stay the same and in some cases, your home insurance rate may decrease because of certain updates or improvements.

Swimming Pools and Trampolines

Your rate may increase if you add something to your home that increases risk, like a swimming pool or trampoline. On average, premiums may increase by $50 to $75 because most insurers will require that you increase your bodily injury liability coverage. The pool will also increase the home value, and it may be covered by insurance as an attached or detached structure. ^[1]

Home Office Upgrades

If you are building a home office, there are few things to consider. First, make sure that business-related property damage is not excluded in your homeowners insurance policy. Next, find out how much is covered. Most home insurance policies typically cover up to $2,500, for home office repairs unless you buy a home-business endorsement. ^[2]

You may even have to consider buying a business insurance policy if you have lots of business property. You do not need a business policy if you simply work remotely for another business. If you are using the company’s equipment, they should be insuring this property, not you. ^[3]

Kitchen and Bathroom Upgrades

Bathroom and kitchen upgrades will increase your home’s value significantly and will cost more to repair or replace, depending on the materials and labor needed to restore their condition. ^[3]

Adding an Extension to the House

If you are building an addition to the home, your premium may increase to cover more property. Home additions increase square footage and there’s more to repair if damaged or destroyed. You will want to report additions to your insurer or else a claim payout won’t reflect the renovations. ^[3]

Adding a Deck

A deck will also increase your coverage needs for part A of your homeowners insurance policy. The deck is considered a part of the home and will increase your claim needs in the event of a covered peril. ^[3]

Are There Home Improvements To Lower Home Insurance?

Safety discounts may apply after you renovate a home, if the upgrades or additions make your home safer. The following are some examples of how you can improve your home’s safety.

Fire Sprinklers Installation

Homes with fire sprinkler systems indoors also get a price break in premiums because they mitigate fire damage. You can save as much as 15 to 20% of your total cost in premiums because a sprinkler will work automatically to preserve your belongings and the home’s structure if there’s ever a fire. ^[4]

Electrical Wiring Upgrade

More up-to-date writing will lower your fire risk. Upgrading an older home’s electrical system can lower home insurance rates anywhere from 5%-15%. ^[4]

HVAC Upgrade

AC systems with surge protection, humidity control, and smart monitoring will prevent indoor floods, mold and structural damage. You can expect a decrease in premiums, but that discount will vary depending on the type of AC system you buy. A window unit probably will not get you a decrease in rate. ^[5]

Roof Upgrade or Replacement

You will see a discount if you get a new roof and considerably if it’s a fire-resistant roof. You can save anywhere from 5 to 35% depending on the materials used. ^[4]

Security Systems

If you upgrade your security systems, gas detectors and smoke alarms, even a deadbolt, you will see a discount. You can expect a discount ranging from 5 to 20% on these safety features, depending on how robust the systems are and how much the insurer is willing to decrease your premiums for it. ^[6]

Fences

Fences around your property lower crime liability, if they are secure. If you have a pool, trampoline or other attractive nuisance, building a fence around it may lower your rate and payments because it’ll deter trespassers from using and getting injured. In some instances, you may not be paid a claim if you don’t have fencing. You could save up to 15% on your home insurance premiums and rest easier. ^[7]

Water Heater Upgrade

A new water heater may lower your home insurance rate because it’ll be less likely to flood the home and cause damage to floors, furniture and more. It may also save you money on gas and electricity bills. There are no explicit discounts but it’s worth it to mention a replacement when you upgrade.

Upgrades That Decrease Home Insurance Rates	Upgrades That Increase Home Insurance Rates
New roof (especially a fire-resistant roof)	Adding a swimming pool, trampoline or other high-risk outdoor recreational feature
Electrical wiring upgrades	Additional square footage to the home or other structures
Plumbing upgrades	Adding an office for a home business (you’ll need a business endorsement on home policy or a separate business policy)
New HVAC system	Kitchen renovations
New water heater	Bathroom renovations
Indoor fire sprinkler system
Fencing around a swimming pool, trampoline or other high-risk feature
Storm shutters and storm windows
Water shut-off devices
Sump pump installation
Home smart devices

Does Homeowners Insurance Cover Renovations or Home Improvements?

Home insurance is not intended for home improvements but to restore your home to its existing condition after an unforeseen incident that causes severe damage, such an extreme storm, fire or burglary. Any upgrades that improve the features or materials of your home would come out of your own pocket, but you may become eligible for a discount, depending on the improvements..

Your property will be a potential hazard to visitors or family members while under construction, so make sure you have adequate liability coverage and consider increasing limits or buying an umbrella policy because you'll be liable for injuries and losses (lawsuits).

Do I Need Insurance for a Home Renovation?

If you’re adding to your home’s main structure, moving walls or finishing a basement, you may need what’s called a builder’s risk policy or an “under construction” endorsement because the job will be extensive and may entail some risks that will not be covered by your existing policy.

Should I Increase My Home Insurance After Renovating?

After completion, you’ll need to readjust your replacement value for the home for a higher one. Remember that your Coverage A on a house is only for the main structure and any attached structures. If you built an unattached structure, add the rebuilding cost of it to the other-structures coverage in your policy.

Increase the liability portion of your policy, if you’re adding a feature that increases risk, like a swimming pool. Consider an umbrella policy too.

In short, revisit all coverage to see if you’ll need a bigger payout if the newly renovated home needs to be rebuilt to include the additions or renovations.

What Type of Insurance is Needed for Fixer Uppers?

With a fixer-upper, buying insurance is a bit more challenging because it's probably a higher-risk investment than a home that's move-in ready. The process of fixing up a home carries higher risks, too, such as on-site injuries and damages.

Before getting quoted, get the property inspected. It will provide you with an accurate estimate of how much work needs to be done.

Chances are that if the fixes are not extensive, and you'll be able to move in within 30 days of closing, you can get a standard or conventional home insurance policy. If your home's fixes require that you live outside the home for a few months, you'll probably need a higher-risk insurance plan or a builder's risk insurance, the most common type of new construction homeowners insurance.

Do I Need Builder’s Risk Coverage for Construction?

Builders risk insurance protects materials you purchased to be installed on your property or en route to your property, in case of damage or theft. Builders risk insurance would cover the costs of material replacement.

What Do I Need To Tell My Home Insurance Company After a Renovation?

After completing renovations, snap before-and-after pictures of your home to provide proof of the upgrades to your insurance company. This is a critical step to take, no matter the size or the cost of the improvement. With this documentation, neither party will be in for any surprises if you ever need to file a claim.

Be sure to ask for discounts based on improving safety and liability risks.

How To Increase Home Insurance Coverage After Renovations

Consider what it costs to build an addition or to replace the systems. Whatever it is you did in home improvements, you’ll probably have to do it again, if a disaster strikes and destroys your home. This means that you’ll need that much more in coverage from your home insurance policy, so it’s important to look at the numbers anew.

1. See what your coverage A, or dwelling coverage, limit is. Does this number have to change, based on your renovations? Or, does it fall under “other structures”? In both cases, you’ll probably have to increase your home insurance so keep the receipts for all the work you did or had done and add that to your coverage limit.

2. Contact your insurer. It’s a good idea to also contact your insurance company and review your numbers with the agent to see what they think. You don’t want to be underinsured, so take your time figuring out what your limits should be. Also, tell the insurer what the timeline is for the renovation project(s).

3. Provide copies of permits. Your insurer will want these, if your rebuilding efforts are extensive and require permits. They may also require before-and-after photos of the home.

4. Increase your limits. Ask your insurance agent to increase your coverage or do it yourself using the insurance company’s website or app. Your rate may not even go up as much as you fear. Whatever the increase is, it’s better to pay more each month than have to pay for yourself if everything is destroyed.

Additional Coverages To Consider

Vacant Home Insurance

If you leave your home vacant for more than 30 days on a regular basis, it’s important to have vacant home insurance coverage, which is appropriate to many second homes.

Commercial Landlord Insurance

If you’re renovating a home that you’re renting out, make sure you have landlord insurance, not homeowners insurance.