In the always unpredictable real estate market, remodeling is one way to increase the value of your home and make it more attractive for potential buyers. With this in mind, you may decide to transform your home’s underused basement into a home office, media room, or children’s playroom by adding carpeting, sheetrock, insulation, electrical wiring, and plumbing.

However, if you neglect to obtain a basement finishing permit, you are likely to lose money on the housing market when you try to sell your house. If your home insurance policy is not up to date and damage occurs to the finished basement, any claim you submit will be paid as if the basement was unfinished.

If you want to finish your basement, there are four things you should do to ensure an increase to the value of your home and protect yourself against substantial loss:

  • Determine how your finished basement will be used. Do you want to turn your basement into a home office or a playroom for your children or a media room for the whole family? Will you need to install additional electrical outlets? Will you need to install a small bathroom? Once you determine the purpose and needs of your finished basement, you can then plan ahead for obtaining the proper permits and any increased premium costs in your home insurance policy.
  • Obtain the necessary permits. When making any additions, improvements, or repairs to your home, you must obtain the proper building permits, including permits for electrical and plumbing work. Contact your city’s permit department so that the work you or a contractor does meets the building codes in your locality. A potential home buyer may decide that a basement that was built without permits and not inspected is unsafe and has the potential for incurring additional repair costs in the future.
  • Work with a licensed contractor. Working with a licensed contractor ensures that your finished basement will be safe. Insurance providers will consider whether or not the work on your basement was done by a licensed contractor when determining the cost of your home insurance premium.
  • Contact your insurance provider. Not adding home improvements to an insurance policy is a common mistake many homeowners make. You should contact your home insurance provider to let them know about your finished basement and any items in the basement (such as a washer and dryer or food freezer) not covered under building coverage that now need to be covered. Be aware that flood insurance does not cover basement improvements.

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