Remodeling? Check Your Insurance!

You've hired an electrician, selected new tile, countertops and appliances, and have the home improvement loan in order. You're all set for your remodeling project -- or are you?

As you embark on any type of home improvement endeavor, be sure you make a call to your insurance agent to determine whether additional homeowner's insurance coverage is needed. And, if contractors or sub-contractors are involved, you'll want to be sure they have the proper insurance so you're not liable for any accidents or damages that may occur while they work on your project.

Check your insurance coverage BEFORE the work begins. If the new work is damaged or destroyed before additional coverage takes effect, you could be responsible for repair costs, according to the Insurance Information Institute.
Home insurance policies typically require that you insure your home to at least 80 percent of its replacement cost. About 25 percent of remodeling projects result in a home value increase of at least 25 percent, according to the Independent Insurance Agents of America. In such cases homeowners insurance needs to be increased to provide adequate coverage.

Owners should be careful when it comes time to projecting renovation benefits. A renovation will usually increase the value of the home, though not always by the amount invested in the improvement. However, some improvements are justified because they create a better lifestyle, because they make a home safer, or because they make a home easier to sell. To see which improvements work best in your community, speak with local real estate experts.

Even smaller projects like decks and home offices -- which might include custom cabinets to include a desk, a computer work station, storage, as well as rewiring to accommodate faxes, computers, cable modems and DSL lines -- should be considered for increased insurance coverage.

The IIAA reports that nearly 60 percent of homeowners who recently made significant improvements have not updated their homeowner’s policies.
"The investment is considerable, in most cases more costly than a new car. While few people would question the need to adjust their auto insurance if they were to go from a compact car to a luxury sedan, many fail to see the importance of safeguarding a significant investment in their home," said Madelyn Flannagan, IIAA assistant vice president of research and development.

The IIAA and the III offer these insurance tips for your remodeling projects, including some suggestions for working with contractors:

* Contact your insurance agent before work begins on your project. He or she will help you determine appropriate coverage for your addition or improvement.

• Find out if the contractor has workers compensation, which covers any medial-related expenses and lost wages if any injuries are sustained.

• Request a copy of the contractor's certificate of insurance. Let your agent look over the certificate to determine if any exposure exists.

• Check with the Better Business Bureau. Follow up with references provided by the contractor.

• If your project involves tearing down walls or chimneys, review your policy for theft and weather damage liability.

• Establish responsibility for uninstalled appliances, cabinets and other items in advance. Your contractor will likely have a builder's risk policy or installation floater to cover such items.

• If you plan on leaving your home during the remodeling, check with your agent about terms of your policy. Vacancy clauses vary from company to company. In some cases, you may not be covered under your homeowners policy if you are gone for more than 30 days.

• If friends or family members will be helping out with the project, you may want to consider a personal liability umbrella policy to cover any potential medical bills.

• If you are working with a contractor who is subcontracting to builders, electricians, and plumbers, make sure they all have adequate coverage.

The need to stay on top of your insurance coverage with each new remodeling project doesn't appear to be going away anytime soon. The National Association of Home Builders has reported the remodeling market to be upwards of $150 billion, fed by ongoing prime interest rate cuts and low mortgage rates, which fuel home improvement projects for those aiming to sell.

Meanwhile, another thing to keep in mind as you increase your homeowners coverage is that any additional furniture, home office equipment, electronics, grills for the deck, or other personal effects, should be added to your home inventory, and if necessary, additional contents coverage or a separate rider should be considered.




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The Louison Team,

Raymond & Stephanie Louison, Real Estate Consultants

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