Does My Homeowners Insurance Cover Home Improvement Projects?

Does My Homeowners Insurance Cover Home Improvement ProjectsBy Richard A. McGrath, CIC, LIA

Are you planning on making updates or renovations to your home this spring? Maybe you’re thinking of remodeling your kitchen or bathroom, or you finally decided to finish your basement or build that addition onto your house. Before you start construction on these types of projects, it’s important for you to talk with your independent agent to ensure your home is adequately protected. If you’ve already started construction or have finished, notify your agent as soon as possible.

The last thing you want to worry about during or after a huge renovation project is whether or not you are covered for any potential damage or losses. If the damage were to happen before you increased your insurance coverage, you may be responsible for the cost of repairs out of pocket. Be sure to let your agent know the specific details of your project; that way, they can provide guidance as to what your existing home insurance policy covers, any updates that need to be made to the policy, and whether you will need other types of coverage to protect your financial investment.

Additional Insurance Coverage

Whether you are hiring a contractor or planning on a DIY project, it’s important to discuss any additional coverage that you might need with your independent agent. Your homeowner’s policy will provide liability insurance, including medical payments for visitors to your home.

If you’re hiring a contractor, it’s critical that you check to make sure they are insured and have sufficient protection. If the contractor or an employee were to get injured on the job, you could be at risk for a potential lawsuit. Ensure that you are properly protected by asking to see a certificate of insurance from the contractor and any subcontractors. Make sure the certificate’s active dates are current and encompass your project’s timeline. As an added precaution, you can increase your liability insurance.

For bigger projects, you can also look into getting a builder’s risk policy, also known as a “course of construction” policy. You can purchase this type of coverage as a stand-alone policy or by adding it onto your existing coverage. Basically, it will protect your home from any damage sustained during construction including wind and rain, theft of materials such as carpeting, tile or wood (but not the contractor’s equipment) and vandalism.

If you are planning on doing the work yourself or with the help of friends and family, you should increase the liability section of your homeowner’s policy. This coverage protects you against bodily injury and property damage sustained by others. Typically, the minimum amount is $100,000, but coverage can be increased up to $500,000. And if you think you’ll need more than this amount, you can also purchase a personal liability umbrella policy.

It’s also important to keep track of any additional purchases you make during the renovation process, such as furniture, exercise equipment, electronics, etc. Keep all receipts and be sure to add new items to your home inventory. To download our free Home Inventory Guide, please visit

Insuring to Replacement Cost Value

Renovations and remodeling projects increase a home’s value, some industry experts estimate by at least 25 percent. However, many homeowners forget to increase their coverage for these costly projects. If you experience a total loss and neglected to speak to your independent agent about any recent improvements, you risk the cost of rebuilding your home to its new state.

Rather than insuring your home to market value, you need to protect it to its replacement cost value. Replacement cost coverage pays the actual dollar amount it would take to completely rebuild your home in the event of a total loss. Over the last few years, the price of building materials has significantly increased while the value of real estate has decreased. Additionally, building codes may have changed since your home was originally built.

Other factors that impact the cost to rebuild your home include: the total living area; style of home; exterior wall construction; number of kitchens and bathrooms (and quality of materials); garage type; special features like fireplaces, porches and skylights; and additions or enhancements. Even small home improvement projects can impact the total cost to rebuild your home, such as adding hardwood floors.

Remember to check to see if any of the updates made to your home regarding plumbing, heating, roof, electric, security system, etc., qualify you for discounts on your policy. Being proactive about speaking to your independent agent about any updates or home improvement projects ensures that your home will be adequately protected in the event of disaster.

Richard A. McGrath, CIC, LIA is President of the McGrath Insurance Agency, a division of Starkweather & Shepley Insurance, located in Sturbridge and Spencer, Mass. He can be reached at 508-347-6850 or at

This article is written for informational purposes only and should not be construed as providing legal advice.