When it comes time for a home renovation project, think beyond installing granite countertops or knocking down walls. Think about renovating your home insurance to protect your investment.
The insurance industry suggests reviewing your coverage with your agent annually, a recommendation roundly ignored by many homeowners. Keeping your agent informed especially makes sense if you’re planning a makeover, simply because there’s no magic formula to determine how much a project might affect your premium.
Ed Charlebois, vice president of personal insurance for Travelers Insurance, recommends talking to your agent if you’re adding to the value of your home by 5 percent or more. Explain what work you’re planning and get an estimate of how it will affect your premium.
Increase your insurance coverage before the work begins in case there is loss or damage. While you’re at it, make sure the contractor and subcontractors are insured for liability and workers compensation.
The most popular renovation projects are redoing the kitchen or bath. Though these jobs can run into the thousands of dollars, they often offer high rates of returns on the investment.
Installing a fire alarm system can save on an insurance premium through discounts, said Charlebois.
Another safety-related project that could save money is replacing an old knob-and-tube electrical system.
“If you completely updated your wiring — modern wiring, circuit breakers — you’re probably eligible for an upgraded program (that could result in a lower premium),” Charlebois said.
Smaller projects — replacing carpet with new hardwood floors or installing granite countertops, for example — aren’t cheap, but the cost isn’t enough to justify a call to your agent. Those things can be taken care of in your annual review.
When you first apply for insurance, prepare to answer questions about square footage, the style of the home, number of bathrooms, the quality of your kitchen and bath (basic builders grade or is it more?). The answers help the agent calculate the replacement cost or cost to rebuild. When you do an annual review, you and the agent can catch those little improvements that add up to a significant increase in cost to rebuild.
Charlebois also recommends taking a complete inventory of what’s in your home. Anyone who has experienced theft, damage or loss knows how important this record is to expedite the claims process. (The Insurance Information Institute offers tips on taking a home inventory at knowyourstuff.org/iii/login.html.)
“Keep an inventory, and keep it off sight in case you suffer a total loss,” he said. “That makes life much easier going forward.”
To learn more about the costs of rebuilding your home, visit travelers.com and search for “home insurance cost to rebuild.”