Newly finished basement and insurance.

Does Renovation Affect Insurance

Updated March 4, 2022 . AmFam Team

Are you considering updating your home, like finishing your basement or installing a swimming pool? When you make an upgrade to your home, you’re adding value to your home. And your insurance needs to be able to reflect that greater value. Take a look at how insurance is affected when remodeling your home.

Are you considering updating your home, like finishing your basement or installing a swimming pool? In the excitement of planning the updates to your home, make sure you know how a renovation or upgrade could affect your insurance.

Why Does Upgrading Your Home Affect Your Insurance?

It’s actually pretty simple — when you make an upgrade to your home, you’re typically adding value to it – you’re increasing the amount of money it would take to replace your home. And your insurance needs to be able to reflect that change, so if your home faces damage, you’ll have the right coverage amounts in place.

Let’s say you upgraded your kitchen with granite countertops, custom-made cabinets and all new appliances, spending over $20,000. But your coverage limit included only your old kitchen, which had laminate countertops, generic cabinets and old appliances. If your house was destroyed in a fire or other disaster, your existing coverage might not be enough to rebuild it just like it was before.

What Kinds of Upgrades Affect Your Home Insurance?

There are a number of upgrades and renovations that affect your home insurance. Take a look at a few of the most popular types:

Finished basement. Are you thinking of turning your basement into a man cave or additional living space? That’s great! But keep in mind that finishing a basement means more property and structure that needs to be covered by your insurance, so you’ll want to let your insurance company know of your addition in order to have the proper coverage amount.

You might want to consider adding sump pump failure and water backup coverage for your finished basement, too. If your sump pump system ever fails or the power goes out, water overflow may occur. And damage from this type of event isn’t typically covered by your standard home insurance policy. This may not be a big deal for a basement that’s not finished, but imagine if your new carpet, furniture, electronics and other features were destroyed. It could get expensive to cover the cost to repair or replace the damages.

Remodeling the kitchen. A kitchen remodel is one of the most common home renovations — and one of the most expensive. But the money you’re putting into the remodel means your home’s value could boost significantly. You’ll want to make sure your home’s replacement cost is updated with your insurance company. This may cost a little more in the short term, but you’ll feel better knowing your home is properly covered if something were to happen.

Getting a new roof. Since your insurance company typically takes into account the age of your roof when determining your insurance cost, replacing your roof may affect it. But here’s the good news: you could earn a discount if you choose to install impact resistant roofing. You’ll also want to consider how having replacement cost value coverage (RCV) will better cover you than actual cash value coverage (ACV). If your roof is damaged by things like wind, snow, or hail, RCV will cover you for the full amount it would cost to replace your roof, while ACV would only pay you what your roof is worth today, taking into account its age and condition. Find out more about RCV versus ACV coverage.

Installing a pool. Bring on the sunshine and barbecues! Adding a swimming pool is great for friends and family to enjoy, but you’ll want to make sure your insurance company knows about the addition. Take a look at key info you’ll want to know about insurance for your swimming pool.

Adding a home office. Are you turning an empty room into a home office for your home-based business? It’s never been easier to run a small business from the comfort of your home, but before you do, you’ll want to understand how to safeguard your investment from the unexpected. Many entrepreneurs think their small home business is covered by their home insurance policy. But the truth is, if you’re conducting business from your home, you’ll likely need to add home business coverage, which will extend the liability limits and coverages of your home insurance to your small business. Learn more about small home business coverage to better understand why you need this protection.

Does Home Insurance Cover Renovations?

If you’re renovating or making an addition to your home, make sure to have the appropriate coverage in place to protect your dwelling while it’s under renovation. Find out more about insuring your home while remodeling it.

Are There Upgrades That Can Lower My Home Insurance?

There are also home improvement projects that could lower your home insurance premiums. For example, if you replace the electrical and plumbing systems in your older home, you could qualify for the renovated home discount. If you install a home security system or other qualifying smart devices in your home, you could earn a smart home discount, too. All great ways to lower your home insurance cost!

No matter how big or small the addition to your home may seem, it’s important to understand that any upgrade to your home isn’t complete until you’ve let your agent know about it. Scheduling a personal insurance review every year is a great way to ensure you’re properly covered from the unexpected. Connect with your American Family Insurance agent (Opens in a new tab) and schedule yours today!

This article is for informational purposes only and includes information widely available through different sources.

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    How Much is Rent & the Security Deposit?

    Any apartment hunter should ask themself this crucial question: “How much should I spend on rent?” Setting a budget ahead of the search helps narrow the possibilities. You’ll save time by eliminating options that are too expensive.

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    How Much are Utilities and What Do I Cover?

    Every apartment complex handles utilities differently. Water, electricity, air conditioning, heating, gas, and more may be split between landlord and tenant. Then there is the matter of which ones you’ll need to get yourself. Your apartment may come with cable and wi-fi, but you may be responsible for them on your own.

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    How Does Parking Work?

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    In short, parking may be a complex situation involving specific locations and extra costs. If you have a car, don’t just ask if parking is available. Get the details. As you weigh your options, consider what’s best for your car as well.

    What’s the Pet Policy & Is There a Deposit or Fee?

    The pet policy won’t matter to every apartment hunter. If you have a furry friend or might want one someday, make this one of their first questions to ask when touring an apartment. A “no” answer is no deal, no matter how great the other perks may be.

    Some landlords may allow pets if you pay a one-time deposit or additional monthly fees. Make sure to keep that in mind during your search.

    What Amenities are Included?

    Utilities cover the most vital parts of a home — the things that make living there comfortable. Amenities are the complex’s welcome bonuses — the things that make living there enjoyable. Common examples include clubhouses, swimming pools, public kitchens, communal laundry machines, and fitness rooms.

    Amenities are great for those who use them, but their presence can justify higher rent. As your landlord takes you through each selling point on your tour, ask them whether these perks are included with your price. Also, make sure to consider if you’ll even use them.

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    Home insurance is for houses. If you live in an apartment, you look for renters insurance instead. In fact, some places make it mandatory for all residents. Be sure to ask your landlord in advance so you can make any arrangements you need.

    This practice is all about liability. Landlords have their own insurance, but it’s based on their duties and would only cover their share of the damages. Renters insurance offers protection for your living space and your belongings. Even if it’s not required, getting your own policy could bring you peace of mind.

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    Applying for an apartment can be complicated and time-consuming. You might have to pay fees, undergo background checks and other screenings, and more just to see if you qualify. This may be preferable to the alternative: apartment listings that promise no credit check may be scams.

    You could always learn about each step of the application process as you go. Still, it never hurts to know ahead of time, especially if there are any fees and risks. If anything is unclear, the landlord should explain it to you.

    What Should I Know About Rent Increases?

    A variety of factors can change the value of an apartment. Examples include market shifts, new installations, repairs and replacements of fixtures. Your rent will likely not change for the duration of your lease. Once the time comes to sign again, though, your monthly payments may very well go up.

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    What are the Lease Length Options?

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    How Do Maintenance Requests Work?

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    What’s the Guest Policy?

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    Whether you’re a homeowner or a renter, everyone can benefit from a home inventory!

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