Home renovations can be an exciting way to increase your home’s value, improve functionality, and create a space that better fits your family’s needs. Whether you’re finishing a basement, adding a bathroom, building a deck, or installing a pool, these improvements can have a significant impact on your homeowners insurance coverage. 

Unfortunately, many homeowners begin renovation projects without considering how those changes affect their insurance policy. Failing to update your coverage before or after a project can create costly coverage gaps if a loss occurs. 

Before you start your next renovation, here are a few important insurance considerations to keep in mind. 

Why You Should Contact Your Insurance Advisor Before Renovating

One of the most common mistakes homeowners make is waiting until a project is complete before speaking with their insurance advisor. 

Your homeowners insurance policy may have limitations related to construction projects, building materials, contractor liability, or vacancy. By discussing your plans in advance, your advisor can review your current coverage and identify any adjustments that may be needed before work begins. 

Your advisor can also help ensure that any contractors working on your property have the appropriate insurance coverage in place, helping protect you from unexpected liability if injuries or property damage occur during construction. 

How Renovations Impact Dwelling Coverage Limits

Your dwelling coverage is the portion of your homeowners insurance policy that helps pay to rebuild your home after a covered loss. Major renovations often increase the cost to rebuild your home, which means your current dwelling limit may no longer be adequate. 

Projects that commonly affect replacement cost include: 

• Home additions
• Additional bedrooms or bathrooms
• Finished basements
• Expanded garage space
• High-end kitchen renovations
• Significant structural improvements

When you notify your insurance advisor about upcoming renovations, they can run an updated replacement cost estimate to determine whether your dwelling coverage limit should be increased. 

Renovations That Often Increase Insurance Needs

Not every home improvement requires changes to your policy, but certain projects can significantly impact your home’s value and replacement cost. 

Common renovations that may require a coverage review include: 

• Adding square footage to the home
• Finishing a basement
• Adding a bedroom or bathroom
• Building a detached garage
• Installing a swimming pool
• Constructing a deck or enclosed porch
• Adding a storage shed or other detached structure

These improvements can increase both the value of your property and the amount of insurance needed to properly protect it. 

Is Damage During Renovations Covered by Homeowners Insurance?

Coverage during a renovation project depends on the cause of the loss and the details of your policy. 

In many cases, damage caused by covered perils such as fire, lightning, windstorms, or certain types of water damage may still be covered. However, coverage is generally limited to the amount of insurance that was in place at the time of the loss. 

It’s important to understand that homeowners insurance typically does not cover faulty workmanship, improper installation, construction defects, or poor design. If a contractor causes damage due to negligence or defective work, responsibility may fall on the contractor and their insurance policy. 

This is why verifying contractor insurance before work begins is so important. 

Hiring a Contractor vs. Doing the Work Yourself

Many homeowners assume insurance coverage works the same regardless of who performs the renovation. In reality, there can be significant differences. 

When you hire a properly insured contractor, their liability insurance and workers’ compensation coverage may help protect you if property damage or workplace injuries occur during the project. 

If you complete the work yourself, however, damages resulting from faulty workmanship are generally not covered by a homeowners insurance policy. 

Before hiring any contractor, ask for a current certificate of insurance and verify that both liability and workers’ compensation coverage are active. 

Additional Insurance Coverages to Consider

Depending on the scope of your renovation, additional insurance protections may be necessary. 

During Construction

Consider discussing the following with your advisor: 

• Builders risk coverage to protect structures and building materials during construction

• Dwelling under construction endorsements when standard homeowners policies have renovation limitations

• Vacancy concerns if the home will be unoccupied during renovations

After Construction

Once renovations are complete, you may need to: 

• Increase your dwelling coverage limit to reflect the updated replacement cost

• Increase personal property coverage for upgraded appliances or electronics

• Add water backup coverage if a basement or crawlspace has been finished

• Review liability needs if a swimming pool has been added

Pool installations may require additional underwriting considerations, including fencing, locking gates, automatic covers, diving boards, and slides. 

Common Insurance Mistakes Homeowners Make During Renovations

The biggest insurance mistakes typically occur when homeowners fail to communicate changes to their insurance advisor. 

Some of the most common issues include: 

• Not notifying their advisor before renovations begin
• Failing to update coverage after the project is completed
• Hiring uninsured or underinsured contractors
• Assuming homeowners insurance covers faulty workmanship
• Forgetting to update coverage after adding decks, detached garages, sheds, fences, or other structures

Each of these situations can create coverage gaps that may not become apparent until a claim occurs. 

Protect Your Investment Before You Renovate

Home renovations are often a significant financial investment. Taking a few minutes to review your insurance coverage before construction begins can help prevent costly surprises later. 

Whether you’re planning a simple remodel or a major addition, your insurance advisor can help ensure your coverage keeps pace with your home’s improvements. 

Before starting your next project, reach out to your advisor to review your policy, discuss potential coverage needs, and make sure your home remains properly protected every step of the way.