insurance

Check Your Insurance Coverage Before Remodeling

You don't want to find yourself underinsured halfway through a major home-improvement project.

To make sure your home remodeling project goes smoothly, you need to do more than find the right contractors and sign all the necessary forms. You also should contact your homeowners insurance company to make sure you have the coverage you need to protect yourself financially during the project.

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According to the Insurance Information Institute, you should let your insurance agent know about your remodeling plans and ask whether you need to update your coverage -- or add coverage. For example, you might need to increase the amount of liability protection you have if you're tackling the remodeling yourself with the help of friends and family (see Why You Should Have Umbrella Liability Insurance). Make sure you have enough no-fault medical protection on your policy to protect you financially if someone gets injured while helping you with the remodeling project.

For bigger projects that require a professional contractor, consider getting a builder's risk policy, or course or construction policy, to protect your home from damage during construction. This policy will provide coverage for wind and rain damage, theft of materials and vandalism.

The III also recommends that you take these steps to protect yourself financially during a remodeling project:

Verify that your contractor has insurance coverage. The contractor should have a commercial business/general liability policy and a workers compensation policy. This will help protect you from lawsuits if a worker is injured during the project. If the contractor isn't adequately insured or won't verify his coverage, III recommends hiring someone else.

Keep records and receipts. Hang on to copies of any contracts and receipts for work done and materials purchased. Also keep receipts of new belongings that you purchase as part of the remodeling and update your home inventory (if you don't already have one, you can use the III's free Know Your Stuff software). Also keep a visual record of the work done by taking pictures before, during and after the renovation.

Update your insurance after the renovation. You may need to increase the amount of coverage you have to rebuild your home if it has increased in size as a result of the renovation. Your insurance company will need records and receipts to assess your needs. And you may need more liability protection if you added a pool or hot tub. You might also need to purchase more coverage if you bought art or expensive items. See What Does Homeowners Insurance Really Cover? to find out whether you should buy a floater or endorsement to cover valuable items.

Ask about discounts. You might be able to get your premium lowered by at least 5% if you installed stronger doors, smoke detectors, an alarm system or dead-bolt locks. Some insurers offer discounts of up to 20% if you install a sprinkler system or alarm that notifies the police, fire department or other monitoring station of an emergency. You may qualify for a discount of at least 5 percent if you installed stronger doors, smoke detectors, a burglar alarm or dead-bolt locks. If you updated the heating, plumbing or electrical systems or made your home more storm-proof, you may get a reduction in your premium because you've reduced the risk of damage.

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