After cooking what feels like 3,985,464 meals in a cramped space, are you finally getting the kitchen of your dreams?
Are you adding a sunroom, updating the bathrooms, or finishing the basement?
Maybe your replacing your roof?
Whatever your home renovation project is, you have likely worked hard, saved up, and waited patiently for this day to arrive. Insurance is an essential component of any home renovation project—and for good reason.
Your remodel will involve major machinery and probably electrical and plumbing work too. Construction is dangerous, machinery fails, and even the most talented, experienced tradesmen make mistakes and get hurt.
Insurance will protect your home, your investments, and the people working on your property to make your home updates possible. Below are specific requirements and laws surrounding insurance for home remodels.
Am I required to have insurance?
Unlike car insurance, insurance is not required to own a home. However, if you finance your home, your lender will likely require home insurance coverage.
In addition (pun intended), home insurance is not required to add an addition to your home.
But, since you care enough about your home to be spending money to improve it, insuring it should be a no brainer for you.
THE SIMPLY INSURANCE WAY
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Will my homeowners' insurance cover remodel work?
Maybe, but probably not. It depends on your coverage and the work that is being done. It is very important that you talk to your insurance agent to find out what you need for your renovation.
In the world of insurance, there are millions of loopholes—loopholes within loopholes.
For instance, if you and your family are not living in your home during any part of the renovations, your homeowners' insurance policy can deny all claims for damages caused while you were away.
Another thing that you need to think about is the increased value of your home.
The updates you are doing will change how much your home is worth, and you could be left drastically underinsured.
Plus, home upgrades that improve the safety and security of your home will lower your home insurance payments up to 35 percent, so don’t delay on updating your policy.
What insurance should I get?
Before you begin your home remodel project, you should seriously consider investing in Renovation Insurance.
This coverage is designed specifically for the job and will keep you from losing thousands of dollars due to lost, stolen, or damaged items.
Renovation Insurance covers the cost of construction materials while they are in transit and are being stored at your home before they are used.
These materials are very expensive, and therefore a prime target for thieves.
If you won’t be living in your home for over 60 days during the renovations, you should look into Vacant or Unoccupied Home Insurance.
This will cover damages, vandalism, and even theft while you are away.
INSURANCE WHERE YOU LIVE
Home insurance by state.
When hiring for the job, take these steps
Step #1 – Ensure workers are licensed, bonded, and insured.
Most often, state laws require construction workers to be licensed before they can be paid to do construction work.
Also, you need them to be bonded in case anything goes wrong causing them to not complete your job.
Additionally, you need to make sure everyone who works on your home is covered by general liability insurance and workers compensation.
If they aren’t covered by their own insurance, you potentially face getting sued and having to pay all of the medical expenses if someone gets injured on your property.
Step #2 – Check for coverage on vehicles, supplies, and subcontractors
You need to make sure that the insurance your general contractor carries also covers his subcontractors, business vehicles, and equipment.
You do not want to get stuck paying for damaged or stolen vehicles, machinery, tools, or worse, someone trying to scam the system.
And again, if someone working on your property isn’t insured, you could wind up being forced to pay their medical bills on top of your expensive home renovation project.
Step #3 – Confirm there’s adequate coverage
Remember insurance has loopholes and limits. It’s your responsibility to make sure they carry enough insurance for the job you’re hiring them for.
All construction workers that you hire should have at least $1,000,000 in general liability and workers compensation coverage.
Insurance can make the difference between thousands of dollars lost due to major damages and a minor setback.
Angel O’Neill, co-owner of Huntingdon Roofing, explains this with a real-life example:
“We had one of those unpredictable storms come through in the middle of a two-day roofing job, and it damaged the home. The insurance covered everything, and it ended well, even though it had been a horrible thing to go through.”
Step #4 – Get added to their policy
Now, this is a trick most people don't know about. You can get added to your contractor’s general liability policy for little or no charge at all.
“This verifies the insurance is active, as it’s dated and comes from the insurance agent, and if he misses a payment and the insurance is canceled, they have to send you notice.”
– Bob Davenport, president of Humble & Davenport Insurance Brokers
Plus, if the insurance pays for damages, your name is on the insurance check. This prevents a dishonest worker or company from taking your insurance money and disappearing with it.
Step #5 – Keep a record
Take pictures before the work starts and through the entire process. Save receipts for all supplies and work you sign off on.
If you have to file an insurance claim, you will need proof of what the supplies, materials, and time were worth.
Investments that Pay Off
Was this more than you budgeted for?
Don’t rush your remodel if you aren’t able to do it right.
You have to spend time and money to protect your home and finances if anything goes wrong during the entire process of the job.
It might seem like a lot of work, but you don’t want to get stuck paying for lost, stolen, or damaged items.
Remember, construction materials are expensive. Taking these steps will keep you from getting scammed or ending up having to pay thousands for damages or injuries sustained during the renovation.
This part of the renovation research won’t be as fun as the online browsing, home inspiration photos, and idea boards, but investing in adequate insurance and the right construction team will keep a nightmare from becoming a reality.
You will want to do all you can to avoid thousands in unexpected bills and years of litigation.