Making home improvements? How to make sure you stay covered by insurance

Tackling a home improvement project, whether it's something as simple as painting your kitchen cabinets or a more extensive home remodel, can be exciting. But nothing can drain your passion for the project faster than finding out your homeowners insurance isn't up to date.

"Making home improvements affects homeowners insurance coverage because in theory, when you make improvements and renovations, you're increasing the value of your home," said Mike McGinn, a renovation underwriter with RenoFi. "In return, you want to make sure your dwelling coverage will cover the new higher value of your property after the renovation is over."

If you're planning to make home renovations, it's important to make sure the end result is covered. Here's how to do it:

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Keep your insurance company in the loop

Before getting too far along with a home improvement project, it's good to let your insurance company know what you're planning. Your current homeowners insurance policy may be sufficient to cover your home as it is now but you may need additional coverages if you're planning something big, like a kitchen or bathroom remodel.

"It's certainly in your best interest to tell your insurance company you're doing a renovation," said McGinn. "Not only because it's important to increase coverage to match your newly improved home, but also to make sure you're covered in the event that your contractor isn't insured."

Letting your insurance company in on your plans can help you reevaluate whether your existing coverage is enough. Specifically, you can review things like the replacement value outlined in the policy, included coverage types, your deductible and insurance premiums. You can also check your liability coverage.

It's a good idea to review your home insurance policy each year anyway to understand what's covered and what's not, as well as what you're paying for home insurance, regardless of whether you're planning a remodeling project. If you're hoping to save money on homeowners insurance, visit Credible to compare home insurance companies and shop their plans today.

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Estimate how improvements may increase your home's value

Some home renovations can offer a better return on investment (ROI) than others. According to Remodeling Magazine's "2020 Cost vs. Value Report," updating countertops with stone veneer and replacing your garage door offer the best ROI. Bathroom and kitchen remodels and master suite additions, on the other hand, offer a lower return on your investment.

So why is that important to know? It's simple. Adding value to your home can increase the replacement cost, which may require you to update your dwelling coverage.

Otherwise, if there's major property damage, your existing home coverage may not be sufficient to rebuild. Getting a professional appraisal of your home value, both before and after making home renovations, can help you estimate how wide the coverage gap may be.

It's also important to document the state of your home prior to, during and after renovations. Taking before and after pictures of indoor living spaces or outdoor improvements to add curb appeal, as well as getting shots of your personal property, can be useful not only for updating your policy but in case you have to file a claim.

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Increase your homeowners insurance to cover home improvements

Once your home improvements are complete, circle back to your existing home insurance policy to see whether additional coverage may be needed.

Again, check your dwelling coverage, personal property coverage, liability coverage and the current replacement cost written into the policy. Then, talk to your insurance company about how any renovations may have boosted your home value and what that may mean in terms of your coverage needs.

Keep in mind that any changes you make to your policy could increase your insurance rates. But, McGinn said, it's better to be safe than go cheap to ensure that any home improvements are fully covered.

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Next steps: Shop around for the right homeowners insurance

Changing home insurance companies could save money and it's something to consider when planning home upgrades. A different insurer may provide better coverage, for example, while charging less for premiums or offering a lower deductible.

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