Do I Need To ​Make Changes To My Homeowner's Insurance Policy If I Am Planning To Remodel My Home?

This is a great question!  Many homeowners, like you, ill spend the winter months planning o remodel their home during Spring.  They ill consult witrchitects, designe and contracto to dentify what they can do to their house to make it a beautiful home, and how much that will cost.  They will search for the right paint colors, flooring, bathroom and kitchen cabinets, appliances and fixtures. Unfortunately, most homeowners will overlook another important aspect of their remodel; being properly insured.

Investing in a home renovation is well worth the time and effort.  The enjoyment that is realized at the end of the construction is well worth the plannin, and inconvenience that a homeowner may experience. t is important to include in your planning process a review of your homeowners insurance policy with your insurance agent. A home improvement an affect your homeowner's olic. Therefore, it is important to identify the additional costs if your coverage needs to be increased during r after our remodeling

Before addressing the insurance question, I'd like to reiterate the importance of hiring a qualified contractor who carries the proper insurance and who only hires qualified sub-contractors who are properly insured.  It is important to make sure your contractors hold a NYC Department of Consumer Affairs license (HIC license) and a Home Improvement Salesperson license (HIS).  Your contractors should be able to provide Certificates of Insurance that demonstrate they carry General Liability, Commercial Auto and Workers' Compensation coverage.  

To answer your question about your homeowner's insurance policy, the answer is yes; chances are you may have to adjust the policy to protect yourself during the remodel.  The first step you should take is consult with your insurance company, or preferably, your insurance agent, to determine whether the limit of property (dwelling) insurance is sufficient to include the completed value of the improvements being made to your home.  They will review your policy with you to determine if there is enough coverage, and if there isn't, make the necessary adjustments to the policy.  With rare exception, homeowner policies no longer provide a 100% guaranteed replacement cost, and this makes it ever so important, for you as the homeowner, to take an active role in managing your risk.  

Whether or not you are doing a home renovation, we recommend that you re-evaluate your homeowner's policy every 3 to 5 years, to make sure that your coverage has kept pace, but not outpaced inflation.  Many insurance agent use oftware to calculate the cost to rebuild a home when preparing a homeowners policy, and so when planning a renovation, the added home value can be included in the cost of the calculation. 

Another advantage in re-evaluating your policy every few years is to verify that you are getting all of the respective credits.  For example, if the remodeling scope of work includes the installation of a new central station alarm, or a sprinkler system, you'd want to make sure that you are getting a credit from the insurance company for this safety system. 

For larger projects, such as big additions or roof raises, you may want to consider consulting with your agent early in the planning stages so that you can consider the additional cost of your insurance premium due to the increase in value of your home. 

A traditional "HO-3" homeowner policy includes coverage for building materials while they sit at the job site. Once they are installed, they become part of the house and are covered as part of the house.  So provided that you've confirmed you have enough coverage on your home, the renovation materials should be covered under your policy.

Another consideration when renovating your home is; who is responsible for the value of the uncompleted work should something happen during the middle of the project?  Imagine this, you are halfway through the project, and there is a small fire and work is halted.  The contractor has completed a portion of the project for which he is entitled to be paid, however the project is now delayed.  There is likely going to be a new scope of work to include repairs to the damaged property.  Your insurance company is going to pay for the repairs, but there is still a contract for the uncompleted work.  A properly implemented homeowner's policy ll provide protection for any claims against a homeowner in matters like this.

Subrogation is another thing to consider in a home renovation.  What if during a remodel, your uninsured contractor was doing work that caused a pipe to leak and it caused damage to your flooring? Your homeowner's policy will likely pay for this damage but you want to make sure that they can recover the money they paid you, including your deductible.  This process is called Subrogation, and just one more important reason to make sure you are using licensed and properly insured contractors. 

The NYS Labor Law puts the responsibility of an injured contractor's employee squarely on the homeowner unless the proper insurance risk transfers are in place. What if the contractor had an employee on the job at your home, who was injured on your property, but the contractor didn't carry worker's compensation insurance? Your homeowner's insurance policy might help cover the cost to pay that worker's claim, but that claim could result in additional legal fees and a increase in your rates, and make it more difficult for you to get insured in the future.

s you can see, there are many more considerations to make other than our choice of home finishes. Insurance coverage should be the top of mind when considering a remodel.  It is the responsibility of the homeowner to be properly insured and to ensure the contractors and subcontractors are properly insured.  With a little communication, all parties can properly protect themselves so that the focus during a renovation is on making sure the project is going smoothly, that schedules of construction are maintained and that all the hard work results in a beautiful home to enjoy with family and friends.

Michael V. Porpora, AAI, CIC – Vice President – RPM Insurance Agency

(718) 761-8900   www.rpminsurance.com