Insurance For Empty House Remodeling

Remodelling an empty house can be a complex process, and it's important to ensure that you have the right insurance coverage in place. Standard homeowners insurance policies typically cover renovations, but it's crucial to consult with your insurance provider to confirm the scope of your coverage. This is because remodelling can increase the value of your home, which may require adjusting your insurance policy to match the new value.

Additionally, vacant homes may not be covered by standard homeowners insurance policies. If you're not living in the house during the remodelling process, you may need to purchase unoccupied or vacant home insurance to protect against fire, vandalism, liability, or other types of claims.

Before starting any renovation project, carefully review your insurance policy and consult with your insurance agent to ensure you have adequate protection. Increasing your liability coverage limits during the renovation can be beneficial, especially if there are more people on your property or if there's a risk of someone getting injured.

It's also essential to confirm that any contractors you hire have adequate insurance coverage, including personal liability, workers' compensation, and property damage coverage.

Vacant home insurance

Most insurance companies will deny claims if your home is left alone for longer than 30 days. However, the specific definition of "vacant" and "unoccupied" may vary by insurer, so it's important to check with your insurance company.

Vacant homes pose a higher risk to insurance companies than unoccupied homes because claims for unoccupied homes are likely to be reported sooner and result in less severe damage. As a result, vacant homes typically have higher insurance rates than unoccupied homes.

You can expect to pay around 50% more for vacant home insurance than for a regular homeowners policy, or about $500 more per year. Some insurance companies, such as Farmers and State Farm, offer vacant home insurance as endorsements or separate policies.

Renovation impact on insurance premiums

The impact of renovations on insurance premiums is not always clear-cut. While some projects may increase the cost of insurance, others may actually lead to a reduction in premiums. The key factor is whether the renovation increases the value of your home and the cost of rebuilding or repairing it.

Renovations that may increase insurance premiums

Renovations that increase the square footage of your home, such as building an extension or adding a basement, will likely lead to higher insurance premiums. This is because a larger home is more expensive to rebuild or repair, and so insurance companies will charge more for this increased coverage. Similarly, upgrading the materials used in your home, such as installing marble countertops or custom cabinets, can also increase rebuilding costs and, therefore, your insurance premiums.

Adding certain features, such as a swimming pool or a home office for a business, can also increase insurance rates. A pool is considered an "attractive nuisance" and increases your liability risk, meaning you may need higher liability coverage. Meanwhile, a home office may require additional coverage for business-related assets and equipment.

Renovations that may decrease insurance premiums

On the other hand, renovations that make your home safer and more secure can lead to lower insurance premiums. For example, upgrading your roof, wiring, plumbing, or electrical systems can reduce the risk of fires, water damage, or electrical damage, and insurance companies may reward you with lower premiums.

Installing security systems, burglar alarms, deadbolt locks, or fire sprinklers can also result in insurance discounts, as they reduce the risk of burglary, fire damage, or other perils.

What to do before renovating

Before starting any renovation project, it is essential to contact your insurance company to determine if your coverage needs to be adjusted. Your insurance agent can advise you on whether you need to increase your coverage limits and by how much. Failing to update your insurance policy before a renovation could leave you underinsured, meaning you would have to pay out of pocket for any damages or repairs.

Renovation insurance options

Renovating an empty house can be a complex process with many variables to consider, and insurance is one of the most important. Here are some insurance options to consider when planning a renovation:

Homeowners Insurance

Before starting any renovation work, it is crucial to review your existing homeowners insurance policy. Standard homeowners insurance policies typically cover renovations to some extent, but the scope of coverage can vary. It is important to understand what your policy covers and what exclusions or limitations may apply. Some policies may have specific clauses related to renovations, such as requiring notification of any changes or imposing penalties for non-disclosure. Understanding your current coverage will help you identify any gaps that need to be addressed with additional insurance options.

Renovation Insurance or Builder's Risk Insurance

Renovation insurance, also known as builder's risk insurance, is specifically designed to protect your home during the renovation process. It can cover damage or loss of building materials, whether on-site or in transit, and provide liability coverage for any injuries that may occur during the renovation. This type of insurance can be purchased as an add-on to your existing homeowners policy or as a separate policy, depending on the scope and complexity of the renovation project.

Vacant Home Insurance

If you plan to live elsewhere while your house is being renovated, vacant home insurance is essential. Standard homeowners insurance policies typically do not cover losses or damages that occur when a home has been vacant for an extended period, usually defined as 30 to 60 consecutive days. Vacant home insurance fills this gap by providing financial protection against vandalism, weather damage, and other issues that may arise while the property is unoccupied. It can be purchased as a separate policy or as an endorsement to your existing homeowners insurance.

Contractor's Insurance

If you are hiring a contractor for the renovation, ensure they have adequate insurance coverage. This should include liability insurance, workers' compensation, and property damage coverage. Request to see their certificate of insurance and verify that their coverage limits are sufficient. Contractor's insurance protects you from financial liability if the contractor or their subcontractors cause damage to your property or if one of their workers is injured on the job.

Umbrella Insurance

If your renovation includes the addition of "attractive nuisances" such as a swimming pool or hot tub, consider increasing your liability coverage with umbrella insurance. This type of insurance provides additional protection beyond your standard liability limits and can help cover the costs of medical expenses or legal expenses if someone is injured on your property.

Specialty Coverage

Depending on the specifics of your renovation project, you may need to consider additional specialty coverage options. For example, if you are adding detached structures such as a garage or shed, you may need to extend your "other structures coverage." Similarly, if you are upgrading your personal possessions with expensive items, you may need to increase your personal property coverage limits or add endorsements for specific high-value items.

Contractor insurance

When hiring a contractor to remodel your home, it is important to ensure that they have the right type and level of insurance. Here are some common types of insurance that contractors may need:

• Liability insurance is essential for contractors as it covers basic third-party risks, such as a customer tripping over renovation materials. It also covers customer bodily injuries, advertising injuries, and personal injuries.
• Property insurance is important for contractors to protect their business property and equipment. This includes commercial property insurance, which covers damage or theft of the contractor's property, and contractor's tools and equipment insurance, which covers repair or replacement of the contractor's tools and equipment.
• Workers' compensation insurance is required in most states for renovation and home remodelling businesses with employees. It covers employee medical payments and employer's liability.
• Commercial auto insurance covers accidents involving the contractor's vehicle, including property damage, injuries to others, and vehicle vandalism or theft.
• Professional liability insurance, also known as errors and omissions insurance (E&O), covers legal costs related to the contractor's work performance, such as failure to meet deadlines or remodelling oversights.

When hiring a contractor, it is important to ask for a copy of their insurance certificates to ensure they have adequate coverage. Additionally, if the contractor hires subcontractors, it is crucial to ensure that they also have the proper insurance coverage.

Home insurance exclusions

• Floods and water damage: Damage caused by natural flooding, rain, sewer backups, or sump pump issues is typically excluded. However, water damage from burst pipes or a malfunctioning water heater is usually covered.
• Earthquakes and earth movement: Damage caused by earthquakes, landslides, and mudflows is generally excluded. You may need separate earthquake insurance or an endorsement to your policy for coverage.
• Vermin and pest infestations: Infestations by termites, bed bugs, or rodents are often excluded. Eradication and remediation costs are typically not covered.
• Mold: Mold coverage depends on the root cause. If it's caused by long-term leaking or poor maintenance, it's usually excluded. But if it's due to a sudden issue, like a burst pipe, it may be covered.
• Wear and tear or neglect: Home insurance doesn't cover routine maintenance issues or damage resulting from neglect, such as leaks or worn-out flooring.
• Power surges: Power surge damage or outages caused by your utility company are typically not covered, but damage caused by a power failure on your property may be covered.
• Home-based business liability: Most policies don't extend liability coverage to home-based businesses. Separate coverage may be needed for business-related assets, equipment, and liability.
• Local building ordinance or law: Damage or loss resulting from the enforcement of a local building ordinance or law to bring your home up to code is usually excluded.
• Intentional damage or loss: Home insurance doesn't cover intentional damage or loss caused by you or a family member, including vandalism or intentional injury to others.
• Nuclear hazards: Damage caused by nuclear reactions, radiation, or radioactive contamination is typically excluded, although fire damage resulting from a nuclear hazard may be covered.
• Governmental action: If a governmental or public authority damages or takes your property, it won't be covered by your home insurance.
• Aggressive dogs: Certain aggressive or dangerous dog breeds may be excluded from liability coverage, and having such a dog could affect your ability to obtain a policy.
• Wind damage in hurricane-prone areas: Separate wind insurance may be needed in hurricane-prone regions, and special wind deductibles may apply.
• Renovations: Failing to notify your insurer about renovations can lead to coverage issues. Some policies may require notification before starting work, and penalties may apply if you don't inform them.

Frequently asked questions