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Remodeling insurance can protect homeowners

Many steps are involved in a successful home remodeling project. A common mistake made by homeowners is failing to consult with a homeowners’ insurance agent before beginning a major home overhaul. The National Association of Insurance Commissioners advises reviewing your home insurance policy before any significant work is done on your home. The right amount of coverage will protect your assets both during construction and afterward when your home is worth more.

According to the independent consumer insurance Web site Insure.com, one in four remodeling projects will increase the value of a home by more than 25 percent, so there’s a good chance you will need to increase your coverage to compensate for renovations done on the home. Many insurance companies require you to insure your home for at least 80 percent of its replacement value. If you have added an extension or installed an inground pool, you may have raised the value of your property enough to necessitate an insurance policy change.

Begin by talking with your insurance company and explain the scope of the planned renovations. Inquire whether you will need to update or amend your current insurance policy to protect yourself financially during the renovation. This is particularly important for those who will be doing the work themselves or asking a friend or family member for help. While many contractors have business and general liability insurance to protect themselves if a worker is injured, homeowners may need sufficient liability protection in the event a non-contractor gets hurt working on your home. Your insurance company may have other types of insurance to protect you further if you are planning a very large project. Failure to ask about coverage before starting the renovations puts you at risk.

If you will be using contractors and subcontractors, be sure that they are insured and bonded. Should they damage your home or be injured during the renovation, their insurance will cover any resulting expenses. However, if they are not insured or bonded, you may be held liable through your own insurance policy or you may have to pay out of pocket.

Keep all receipts and document the progress of the renovation. You may need this information to present to your insurance carrier after the renovation is complete. This way you can request a new appraisal of the property and secure adequate insurance coverage.
Certain improvements may make you eligible for discounts. For example, a new heating system, energy efficient appliances or an alarm system may qualify you for rebates or lower premiums.

Homeowners may think they have covered all of their bases when preparing for a home renovation project. However, it also is essential to consider insurance needs before you begin work and then again when the project has been completed and the value of the home has increased.

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