Avoid coverage gaps during and after a remodel
You’ve hired a reputable builder, collected paint swatches and selected your new fixtures. Now your long-awaited remodeling project is about to begin. Before the first hammer swings, there is one more thing that you need to do—talk to your insurance agent.
Update your home, update your insurance
When undertaking a remodeling project, people often forget to review their insurance needs, too. Whether your renovation is large or small, you are increasing both the value of your home and your exposure to risk. To ensure that your project goes smoothly and that you have the coverage you need, here’s what you need to know.
Working with General Contractors
The best way to minimize your renovation risk is to hire a reputable general contractor to manage the job. As part of the bidding process, ask the general contractor to provide a Certificate of Insurance and/or copies of the policies. Specifically, check for coverage for the following:
- Workers’ compensation: Verify that he or she has workers’ compensation coverage in the event that an employee or subcontractor gets hurt on the job.
- General liability: Ask if the contractor has liability insurance, which covers losses due to negligence and errors or omission, that result in property damage. Also, ask that you are added as an “additional insured.”
- Builders risk: This policy is designed to cover damage to your home and materials, including those not yet installed. Your insurance agent can help you verify whether you should require this from your contractor, based on your renovation project.
Regardless of recommendations or reputation, never work with a contractor who cannot show proof of adequate insurance coverage. [Read more about Certificates of Insurance.]
Advice for Do-it-yourselfers
If you decide to go it alone and manage the renovation yourself, you assume all the risks. It’s important to review your homeowners policy for liability and property coverage. Depending on the scope of your project, your current policy may not be sufficient. Your insurance agent can advise you on what additional coverage you might require.
Should you choose to hire out some jobs to subcontractors, make sure they can provide you with a Certificate of Insurance (or copies of their policies) to ensure they have adequate liability insurance and workers’ compensation in force.
If a friend or relative helps out as a favor—no money changes hands—and gets injured, your homeowners insurance typically covers the cost of their injuries, up to your policy limits. It’s important to note that a homeowners policy is not designed to provide primary liability protection for these injuries. If a helper is seriously injured, the domino effect can be financially and emotionally difficult for all who are involved. For an extra layer of protection, it’s a good idea to also carry umbrella liability coverage, which kicks in to provide liability coverage above your homeowners policy limits.
Insuring the Real Value of Your Home
Experts estimate that about ¼ of remodeling projects add at least 25 percent to the value of a home, yet often most homeowners forget to increase their coverage to protect their investment. Most homeowners insurance policies require 100 percent of the home’s replacement cost, so it’s important to raise your home’s policy limit before your project begins.
And as long as you’re remodeling, you might consider the following projects which could result in discounts to your homeowners premium:
- Install a home security system
- Update exterior locks to dead bolts
- Install smoke alarms and other fire protection devices (such as sprinklers)
- Consider a whole-home water leak detection device
Your insurance agent can advise you on what savings you can expect. [For more ways to save on your homeowners insurance, see our blog.]
Renovating your home is exciting, but it does pose financial risks. Contact General Southwest Insurance Agency at (480) 990-1900 to learn more about our risk management and personal protection solutions for home, auto, business and life.
This article is for informational purposes only. The information provided herein is not intended to be exhaustive, nor should it be construed as advice regarding coverage. Eligibility for coverage is not guaranteed and all coverages are limited to the terms and conditions contained in the applicable policy. © 2008, 2013, 2016 Zywave, Inc. All rights reserved.
