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Home Improvements And Homeowners Insurance: When To Consider A Coverage Increase

2010-02-10

Making improvements to a home can necessitate a change in a homeowners insurance policy. Many homeowners choose to make upgrades to their homes, including new rooms, extra security or even simple cosmetic changes. Any of these can require an update to an existing insurance policy in order to make sure the home is properly covered.

When a home insurance policy is first purchased, it will cover the value of the home as it was when the owner took possession. The insurance company will want details such as the square footage of the home, if the basement is developed, and how many bedrooms are in the home. The premiums and total amount of coverage for the home will be based on the price of the home, the neighborhood it is located in, and all of the details mentioned above. Many homeowners, however, choose to improve their home in one fashion or another after a few years of occupancy. Depending on the type of improvements done, it can be worth informing the insurance company and increasing the amount of coverage on a home.

Many small improvements to a home, such as installing a security system or double-paned windows can actually result in a premium decrease if the home is considered to be more secure or more energy-efficient, and it is always a good idea to keep insurers up-to-date on any project which decreases their risk in insuring the property. Other home renovations, such as finishing a basement or remodeling a kitchen, do not affect the security of the home, but change it in such a way that a higher level of coverage may be warranted. Take a newly finished basement, for example. When calculating the square footage of a home, most insurance providers do not take the square footage of an undeveloped basement into account, and do not include that basement in the overall amount of homeowners insurance coverage. This is because an unfinished basement is not living space - it will merely be used for storage.

If a homeowner converts that basement into a small rumpus room, one bathroom and one bedroom, it has now become an integral part of the house, and one which is not covered by the original insurance policy. It is at this time that the homeowner should increase their coverage to include the new basement, as a claim on any property lost or damaged in that basement if it is not listed on the policy will likely be rejected. Any home improvement project which changes the use of a room in the home or adds to its square footage should be accompanied by a call to the insurance company to raise coverage levels.