Can Home Improvements Impact Homeowners Insurance?

Many homeowners understand the positive implications home improvements can have on a home’s value. But people often forget about the impact renovations can have on homeowners insurance policies. In fact, most homeowners insurance policies are not updated—or even looked at—until after a loss has incurred.

Before starting any home improvement project, it is important to look at your insurance coverage and adjust as needed, to avoid the risk of being underinsured. Most renovations require an updated insurance policy to adequately protect homeowners from loss. These changes may cause a change in premium amounts.

Modernize is here to help you prepare yourself for a home improvement project. Here is an overview of how home renovation projects might impact your homeowners insurance or home warranty policies.

Be Prepared Before You Renovate

Before planning any home renovation, be sure to consult your insurer to discuss any potential policy—and premium—changes that might occur as a result. This can also help protect homeowners should something go wrong during the renovation process.

While a jump in insurance rates might not be an exciting part of home improvements, neglecting to update your policy can have consequences. For example, if you have homeowners insurance based on a kitchen with laminate countertops, but upgrade to costly granite countertops, the existing coverage might not suffice to cover losses in the event of a disaster.

Which Home Improvements Will Result in Higher Insurance Premiums?

Certain home improvement projects are more likely to result in higher insurance premiums than others. For instance, if a project will presumably boost your home’s value or result in a liability, it can raise your insurance rates. Here are a few projects that typically come with higher insurance premiums.

Home Additions

Sometimes homeowners need to accommodate an expanding family, new office, hobby, or other life event that requires additional square footage. A home addition or room renovation likely will not be covered by an existing homeowners insurance policy. Expect these projects to result in a rate increase.

Homeowners might also need other types of coverage for select projects. For example, a finished basement may need water backup coverage if the sump pump is located there.

Even projects that extend outside of your home, such as a new deck or patio space, could require an insurance reevaluation as they increase the home’s value.

Putting in a Pool

While a pool installation is a desired renovation for many homeowners, to insurance companies it can be considered a liability.

A new pool will likely cause your homeowners insurance to increase and might come with certain requirements. For instance, some insurers may require a locking fence around the pool’s perimeter or a locking cover to protect from accidents. 

Additionally, features like a diving board or slide could be considered an even greater hazard and come with higher premium spikes.

Some homeowners insurance policies may also recommend that pool owners opt for higher liability coverage. This can cover medical costs in the event a person is injured during pool activities.

Which Home Improvements Result in Insurance Savings?

Not all renovations result in homeowners insurance rate increases. In fact, several upgrades to your home can qualify you for discounts or savings. Here are a few examples of project that can reduce your rates.

Renovating Existing Systems

Replacing aging pipes during kitchen or bath renovations, upgrading electrical systems, or installing a new HVAC system or water heater can make your home less of an insurance liability and thus reduce your premium.

Installing a New Roof

A new roof is a great way to increase the value of your home. It can also save you money on your homeowners insurance policy.

Some homeowners can get even bigger discounts if they live in areas prone to severe weather. New roofs that employ safety features such as hurricane straps, waterproofing, impact-resistant shingles, or fire-resistance typically result in insurance savings.

It is always important to remember to update your coverage after a new roof installation. Such improvements might not be protected should a disastrous event occur.

Home Security Upgrades

Protective features like deadbolts, fire alarms, or a home security system, have the potential to save you money on homeowners insurance premiums. As with other renovations, the amount of savings—if any—is subject to the type of system or feature and the insurance provider.

Understand Your Project’s Impact on Home Warranty

A home warranty is a service contract that covers the costs to repair or replace your house’s major systems and appliances.

Before performing any home renovations, it’s important to understand how such work will impact these systems and appliances. Then, figure out what it means for your home warranty. For example, some work on an HVAC system or security system could void a warranty. 

Contact your home warranty provider to discuss any coverage impacts in detail. If you do not yet have a home warranty and are planning a home improvement project, now is a great time to find out the savings and benefits a home warranty can offer.

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