Home Improvement Projects & Your Homeowners Insurance
A remodel or addition can do more than refresh your home’s look—it can change what your home would cost to rebuild. Here is what to keep in mind so your coverage can keep pace with your improvements, and how to work with contractors along the way.
Why Home Improvements Matter for Your Coverage
The dwelling portion of a homeowners policy is typically built around your home’s replacement cost—the estimated cost to rebuild it with materials of like kind and quality. When you finish a basement, add a room, or upgrade a kitchen or bath, you may be increasing that rebuild cost. If your coverage limit has not been updated to reflect those changes, you could find yourself underinsured after a covered loss.
That gap often is not obvious until a claim is filed. Reviewing your dwelling coverage limit after a significant project may help keep your coverage aligned with your home’s current value. Whether and how a given improvement affects your replacement cost depends on the project and is subject to your policy terms and your carrier’s valuation methods.
If you want a refresher on how the pieces of a homeowners policy fit together, see our overview of homeowners insurance options.
Projects Worth Discussing With Your Agent
Not every weekend project changes your coverage picture, but larger or structural ones often can. Consider reaching out before and after projects such as:
A quick conversation when plans are taking shape—and again once the work is complete—may help your coverage reflect the home you actually have.
Improvements That May Affect Risk and Coverage
Some projects do more than change value—they can change how a carrier views the risk at your property. A few common examples:
- Pools and trampolines: Often considered “attractive nuisances,” these features may affect liability considerations and underwriting. Some carriers ask about safety fencing, covers, or other measures.
- Wood-burning stoves and fireplaces: Adding a wood stove or similar appliance may raise fire-related considerations, and carriers may ask about professional installation and clearances.
- Electrical and plumbing updates: Replacing aging knob-and-tube wiring or old plumbing may sometimes reduce risk in a carrier’s eyes, which can be worth mentioning when you update your information.
- Home-based businesses: Converting a room into an office, studio, or shop may create coverage gaps, since standard homeowners policies typically limit business property and liability. A separate endorsement or policy may be worth discussing.
How any of these features is treated varies by carrier and is subject to policy terms. A licensed agent can help you understand the options available for your situation.
Permits, Building Codes & “Ordinance or Law” Coverage
Many projects require permits and inspections to confirm the work meets current building codes. Keeping permits and records is good practice not only for resale, but also because code compliance can matter if you ever need to rebuild.
Older homes are sometimes “grandfathered” under the codes in place when they were built. After a covered loss, however, a rebuild may have to meet today’s codes, which can cost more than simply restoring what was there before. Ordinance or law coverage may help pay for that added cost of bringing an older home up to code.
Whether this coverage is included, available as an endorsement, or subject to specific limits depends on your policy and carrier. It may be worth asking about, particularly for older homes.
Hiring Contractors: Protecting Yourself During the Project
While the work is underway, there is added activity—and added exposure—at your property. A few steps may help you manage that risk:
- Ask for a certificate of insurance. Confirm the contractor carries general liability coverage and, if they have employees, workers’ compensation insurance. This documentation may help protect you if a worker is injured or property is damaged during the job.
- Consider builder’s risk coverage. For a large project such as a major addition or extensive renovation, a builder’s risk (also called course-of-construction) policy may help cover the structure and materials while work is in progress. Whether this is needed depends on the scope of the project.
- Think about your own liability. Increased foot traffic and an active job site may raise liability considerations during construction. Reviewing your liability limits with your agent may be worthwhile before a big project begins.
- Get it in writing. A clear, written contract that spells out scope, timeline, payment, and insurance expectations may help reduce disputes down the road.
Some Updates May Work in Your Favor
Not every change adds risk. Certain improvements may actually be viewed favorably by carriers. A new roof, for example, or updated electrical, plumbing, and heating systems can reduce the likelihood of certain losses—and updating older systems may sometimes positively affect insurability.
Because these improvements are not always reflected automatically, it may help to share the details when you complete them. Whether any particular update affects your coverage or eligibility is determined by the carrier and is subject to policy terms.
Frequently Asked Questions
Do I need to tell my insurance agent before I start a home improvement project?
It is generally a good idea to let your agent know before and after major projects such as kitchen or bathroom remodels, additions, finished basements, or a new roof. Renovations can increase your home’s replacement cost, and updating your dwelling coverage may help you avoid being underinsured if you later file a claim. Coverage is subject to the terms, conditions, and exclusions of your policy.
Will a renovation raise the replacement cost of my home?
Many additions and upgrades increase the cost to rebuild your home with materials of like kind and quality. If your dwelling coverage limit has not kept pace with those changes, you may not have enough coverage to fully rebuild after a covered loss. Reviewing your limits with a licensed agent after a major project may help keep your coverage aligned with your home’s value.
Should I confirm that my contractor carries insurance before hiring them?
Yes. It is common practice to ask any contractor for a certificate of insurance showing both general liability and, if they have employees, workers’ compensation coverage. This documentation may help protect you if a worker is injured or property is damaged during the project. Requirements and protections vary, so review the details with the contractor and your own agent.
What is “ordinance or law” coverage?
Ordinance or law coverage may help pay the added cost of rebuilding to current building codes after a covered loss. Older homes are sometimes “grandfathered” under prior codes, but a rebuild may need to meet today’s standards, which can cost more. Whether this coverage is included or available, and the limits that apply, are subject to your specific policy and carrier.
Can certain home improvements affect my insurability or risk profile?
Possibly. Features such as pools, trampolines, and wood-burning stoves may affect liability and underwriting considerations, while updating older electrical, plumbing, heating, or roofing systems may sometimes reduce risk. A home-based business may also create coverage gaps under a standard homeowners policy. A licensed agent can help you understand how a particular project may relate to your coverage options.
Planning a Project? Let’s Review Your Coverage
Before or after a renovation, a quick coverage check may help your homeowners policy keep pace with your improvements. We can help you explore the options available from our carriers and answer questions about contractors, permits, and rebuilding costs.
Important Information
This information is provided for general educational purposes only and does not constitute insurance advice or policy recommendations. Coverage features described are examples and may not be available in all policies or from all carriers. Actual coverage is subject to the terms, conditions, and exclusions of the policy as issued. Please consult with a licensed insurance professional to discuss your specific coverage needs and options. Stan Steele Agency is licensed in New York State.