Insuring Home Improvement Success

When you're planning to spend thousands of dollars on home improvements, the last thing you want is for your investment to go down the drain. For that reason, it's crucial to make sure you've taken all the necessary steps to insure your project before you begin.

Step One: Contact your insurer

Major renovations can leave your home exposed, physically and financially. Those new French doors could be stolen before they are installed. Major roof work might leave your home exposed to the elements, some of which might not be covered under a regular homeowners policy.
In such cases, adjust insurance coverage temporarily. During construction, there may be some kind of insurance rider just in case there's an accident or something that protects you in addition to your insurance coverage. Talk to your insurance agent about what you're planning, and he or she can guide you through short-term coverage options.

Step Two: Find an insured contractor

When hiring a contractor, check to see whether that person is properly insured. Make sure they have workers' compensation for their employees and have general liability insurance for the company. What that means is when a professional contractor is working on your house, if a worker is injured, you're not liable. If the contractor damages something, destroys something or burns your house down, you're protected.

Likewise, if something happens to the contractor's tools or equipment while the project is being completed, his insurance will pick up those costs. Uninsured contractors may charge you less for the job, but you'll pay the price if something goes wrong during the renovations. And even if a contractor tells you he's insured, don't take his word for it. Have the contractor show you a certificate of insurance.

What if you decide to do the project yourself? In that case you don't so much have a liability or a third-party liability issue. As a result, there's no need for workers' compensation or general liability insurance. But, depending upon the scope of the project, your insurance agent may suggest you hire a professional instead. We would never recommend that a policyholder go out and do any type of work that would require a license, especially around an electrical or plumbing system. Also, if you damage your property in the process and your insurance provider determines that your negligence caused the mishap, it might not pay the claim.

Step Three: Get building permits

Some jobs require building permits, particularly if the structure of your home will be changed. In these instances, work must adhere to building codes. Your city or county government can tell you whether your project is under this category. If so, have the contractor apply for the permits. Once the job is done, a building inspector will inspect the work.

If the work fails the inspection, the contractor is liable and has to make adjustments. Incompetent builders can have a tremendous effect on your home's coverage. If you add a room to your home and it does not meet building codes, your insurer could refuse to cover it.

Step Four: Estimate the project's worth

Every home improvement project need not warrant a change to your home insurance policy. If you buy a new refrigerator, change one or two appliances or upgrade one of the bathrooms, there's probably no need to make revisions. But any time you're investing more than $25,000 back into the value of your home, your insurance company should really be on notice of that change. If unsure, err on the side of caution and check with your agent anyway.

Step Five: Review your policy

Once the project is complete, your insurer can help you determine how much value the work has added. This information is crucial: You want the homeowners policy to reflect the new, upgraded value of your home. Say your home is insured for $200,000. Add an expensive addition but fail to revise the policy, and it's like the work didn't happen. If your house burns down, what proof do you have of any improvement work?