With the recent improvement in the U.S. economy, homeowners have begun to remodel or add on to their existing homes. We recently published a blog post about the steps to take when hiring a contractor. However, you also need to be concerned about what to do with insurance once your construction project is complete. Most likely, the value of your home has changed and this change needs to be reflected on your home insurance policy as soon as possible.
La Jolla Light reported that the current trend is luxury remodeling projects. These remodels can significantly increase the value of your home, so you need to make sure your home insurance policy keeps up with the value. As you know, your policy reflects the cost to replace any damaged or destroyed portions of your home. While it’s always a good idea to review your policy at least annually due to inflation and market increases in labor and materials, a remodel requires a special review of your home’s value.
Fortunately, since you have just completed a construction project on your home, you know the exact current price of the work completed. This will give you a good idea of the change in your home’s replacement cost. However, don’t make the mistake of simply adding the cost of the project to your home’s existing replacement cost. Consider that part of your remodel project probably involved the demolition and removal of existing parts of your home. In an insurance claim, this cost would likely not be duplicated when it comes to rebuilding or repairing damage. Even if it were required, demolition has a separate limit under the home insurance policy, so it does not need to be considered in the overall replacement cost.
Revising your home’s replacement cost in the event of add-ons to the existing structure can be more difficult than that of a remodel. In fact, it’s a good idea to consult with your insurance company if you plan on making any structural changes to your home. An addition will increase the square footage of your home and that’s an important piece of underwriting information. If you simply reported a higher replacement cost without advising your insurer of the structural changes, the insurance company may not have the full picture of the risk they are insuring. In the event of a claim, when they discover this fact, you may find yourself with a lot of explaining to do or even the possibility of coverage being denied.
In either a remodel or addition, you need to keep your insurance company informed of material changes to your home no matter where you live: Sacramento, San Antonio, San Jose, Seattle, Tulsa – doesn’t matter. You should also not wait until the project is complete to advise them of the changes. If damage occurs during the construction process, they may have some uncomfortable questions for you about why you did not disclose the work ahead of time. By keeping your insurer informed, you will avoid any unpleasant surprises in the event of a loss.