Renovating can change the value of your home. In fact, improving your home’s value is one of the chief motivations for renovating, alongside updating your home to better fit your lifestyle and keeping it in a state of good repair.
But that change in value can have important consequences for your home insurance. Your policy is designed to help you repair damages or rebuild after a fire, storm, natural disaster, or another type of loss. If it’s not up to date when something happens, that can leave you on the hook for rebuilding your home the way it was, not to mention replacing your belongings.
If you’re not sure whether or not you should review your home insurance policy due to renovations, it helps to know what’s covered with fire insurance and how it works.
Personal Contents
The Contents part of your insurance covers your belongings. That includes things like:
• Home computers and laptops
• Clothing
• Furniture
• Media like DVDs and books
• Tools
• Musical instruments
• Food
When you’re renovating, Contents coverage becomes important when it comes to appliances and fixtures. It may not be immediately clear when something falls under Contents coverage if it’s an appliance or a fixture.
Generally, if the appliance is standalone, it should be covered by Contents coverage. That would include the fridge, stove, washer, dryer, etc. If it’s fitted to the building, such as your bathroom fixtures, it likely falls under Structure. It doesn’t hurt to check with your insurer so that you’re confident about which part of your policy covers it.
Additional Living Expenses
This part of your coverage reimburses expenses incurred while you’re unable to live in your home. This includes costs like staying at a hotel immediately after a fire, renting a home while repairs are completed, renting a storage unit for belongings that you’ve saved or replaced, etc.
Longer reconstruction periods can stretch your budget to the limits of your Additional Living Expenses coverage. If you’ve added any hard-to-source materials or there is any work that will require a specialist to complete, consider looking into extra coverage here because you can expect things to take longer.
Structure
When you make renovations, structural insurance is arguably the most relevant type of coverage. Structural coverage will pay to repair or rebuild your home itself. This includes building materials and labor costs. You can expect it to apply to:
• Damage to both the interior and exterior of your home
• Windows, doors, and the foundation
• Damage to your floors
• Fixtures such as plumbing and lighting
Some home insurance policies will pay out the cost of replacing damaged materials. This is called Guaranteed Replacement Cost Coverage. Others will calculate the depreciated value of different aspects of your home, which is known as Actual Cash Value. For example, they may calculate the depreciation on an older roof and pay out based on that.
However, if you haven’t reported these renovations to your insurer, they won’t be covered in the case of a loss. Get in touch with your insurer and review your policy if you’ve made additions or renovations to your home.
