Insurance: Year Built Vs Remodel

When it comes to insurance, the original year a house was built can be a significant factor in determining coverage and rates. While a total remodel can enhance a home's value and appeal, it may not always result in higher insurance premiums. Here's an overview of the considerations:

Insurance companies often base their rates on the age of a home, as older homes may have outdated systems and be more prone to damage. As such, a total remodel that includes updates to electrical, plumbing, and roofing can lead to lower insurance rates. Renovations that increase living space or use high-end materials, on the other hand, can increase rebuilding costs and, consequently, insurance premiums.

It's essential for homeowners to consult their insurance agents before embarking on significant remodelling projects. Discussing plans and obtaining guidance on necessary coverage adjustments ensure that the home is adequately protected during and after the renovation. This proactive approach helps prevent the risk of being underinsured, which could result in financial strain if unforeseen events occur.

Additionally, verifying that contractors have adequate insurance coverage is crucial. This includes liability insurance and workers' compensation coverage to protect against potential lawsuits in the event of injuries during the renovation process.

Increasing home square footage

Increasing the square footage of your home can be a tedious and messy job, but it's a worthy investment that can add space and functionality without the upheaval of moving house. Here are some ideas for increasing your home's square footage:

Build an Extra Room Over Your Garage

If you have a small lot but need more rooms, a room above your garage might be the perfect solution. You'll save on construction costs because the garage's foundation is already in place. You'll just need to add walls, windows, and a roof. The average cost of building a room above a garage is $80 to $200 per square foot.

Finish Your Basement

Basements are often left unfinished, but renovating them is one of the easiest ways to add extra living space. Depending on your needs, you can turn your basement into a home office, gym, extra bedroom, or even a small apartment. Basement renovations typically cost between $25 and $90 per square foot, with the entire process averaging $30,000.

Add a Bump-Out

A bump-out is a small extension, usually of a kitchen or bathroom, that adds a few extra feet of space. In a kitchen, a bump-out can provide room for a breakfast nook or extra counter space. In a bathroom, it can accommodate a bathtub or create space for a walk-in closet. Bump-outs are less costly and time-consuming than full room additions, and they usually don't require additional heating or cooling. The cost of a bump-out varies from $5,000 to $30,000, depending on the size.

Convert Your Porch or Patio into a Sunroom

Converting your porch or patio into a sunroom can add valuable square footage to your home. To be considered livable space, it must be enclosed, accessible from the house, and have heating and cooling. Sunrooms are typically constructed from prefabricated kits, which cost between $15,000 and $22,000, with a 50% return on investment.

Add a Second Story

If you need to add a lot of new space to accommodate a growing family, consider adding a second story to your home. This option is also ideal if your lot size doesn't allow for a ground-floor extension. However, this is a complex and expensive project, costing between $150 and $300+ per square foot.

Before embarking on any of these projects, it's important to consult with builders and designers, check local zoning ordinances and building codes, and obtain any necessary permits.

Renovation insurance

• Building materials, including their transportation to your property.
• Foundation repair, including collapse.
• Additional liability protection in case someone is injured on the property.
• Extra costs due to delays, such as interest on a construction loan or permit fees.

The cost of renovation insurance depends on the location of the home, the scope of the renovation, the materials used, and the duration of the project. Small projects may cost less than $50 per month, while larger projects could cost a few hundred dollars per month.

Before starting a renovation project, it is important to review your existing home insurance policy and contact your insurance company to determine if you need additional coverage. Some renovations that may increase your insurance rates include:

• Increasing the home's square footage.
• Adding high-value features, such as granite countertops or new appliances.
• Adding a pool due to the associated liability risk.
• Adding a home office, especially if you need to increase coverage for business-related assets and equipment.
• Upgrading your kitchen or bathroom with higher-quality materials and appliances.

On the other hand, some renovations may lower your insurance rates by making your home safer and reducing the risk of a claim. These include:

• Replacing or upgrading your roof with more durable materials.
• Upgrading outdated electrical wiring or plumbing systems.
• Installing security systems and sprinklers.

It is also important to ensure that your contractor has the necessary insurance coverage, including liability insurance and workers' compensation.

Vacant home insurance

When purchasing vacant home insurance, it's important to review the specific protections offered by the insurance company and choose a policy that meets your needs. Some insurance providers may offer vacant home insurance as an add-on to an existing policy, while others may require a separate policy. It's also important to be honest with your insurance company about the status of your property.

Contractor insurance

Types of Contractor Insurance

Contractors usually need several types of business insurance to protect against different risks. The most common types of contractor insurance are:

• General liability insurance: This is usually required by your general contractor to protect your business and others on the project in case of lawsuits.
• Inland marine insurance: This covers business property while it is being transported or stored by a third party.
• Builder's risk insurance: This covers damage or loss to buildings during construction or renovation as a result of fire, weather events, vandalism, or other hazards.
• Workers' compensation insurance: Almost every state requires employers to have workers' compensation insurance, which covers employees who are injured or become ill while at work.
• Commercial auto insurance: This covers vehicles that you use for work and protects you from expenses related to accidents, such as property damage and injuries.
• Commercial property insurance: This covers business property that is damaged by accidents, weather events, or other hazards.
• Professional liability insurance: This covers claims against your business for mistakes, oversights, breach of contract, professional negligence, or failure to deliver a service on time.

Cost of Contractor Insurance

The cost of contractor insurance varies depending on the size of your business, the location, and whether you have filed insurance claims in the past. Policies with higher limits or lower deductibles are usually more expensive. According to business insurance marketplace Insureon, the median cost of contractor insurance can be as much as $595 per month when purchasing multiple individual policies. However, you may not need all of this coverage. Insureon reports the following median costs for insurance policies for contractors:

• Less than $70 per month for general liability insurance.
• $275 per month for workers' compensation insurance.
• $150 per month for commercial auto insurance.
• Less than $15 per month for contractors' tools and equipment insurance.
• $85 per month for professional liability insurance.

Where to Get Contractor Insurance

There are many insurance companies that sell the policies that contractors need. Some companies that offer contractor insurance include:

• Thimble: Thimble offers temporary or ongoing policies and allows you to ensure that your contractors have the necessary insurance.
• Next Insurance: Next sells insurance packages tailored to different specialties and allows you to share certificates of insurance digitally.
• Nationwide: Nationwide offers customizable policies and construction bonds.
• The Hartford: The Hartford offers a business owner's policy with add-ons tailored to contractors, such as coverage for tools and equipment.

Premium discounts

While some home renovations can increase insurance premiums, others can lead to discounts. Upgrades that make a home safer and reduce the risk of a claim are often rewarded with lower premiums. For example, replacing an old roof with a sturdier material can result in a premium discount, as newer roofs are less likely to leak or be damaged by hail. Similarly, upgrading outdated electrical wiring to modern Romex wiring can reduce the risk of fires, leading to lower insurance rates.

Homeowners can also benefit from premium discounts by installing safety and security features. For instance, installing a burglar alarm or deadbolt locks may result in a discount of at least 5%, while a sophisticated sprinkler system, along with a fire and burglar alarm that alerts the police, can lead to a reduction of up to 15-20%. Additionally, hurricane-proofing measures such as hurricane straps, impact-resistant shingles, and storm-safe windows can make a home more resistant to wind and hail damage, potentially lowering insurance rates.

Renovations that improve the resilience of a home against natural disasters, enhance security, or reduce the risk of fire and water damage are often viewed favourably by insurance providers and can result in premium discounts.

Frequently asked questions