Does Homeowners Insurance Cover Home Renovation Risks?

Planning a big remodel? It’s important to consider what can go wrong when updating or renovating your home and hiring professionals to complete your home projects. This article discusses some best practices for hiring contractors and some potential pitfalls to avoid.

Current Home Renovation Environment

It’s an expensive time to begin a home renovation. Recent supply-chain shortages have driven building costs up, and the recent labor shortage has driven wages up. Additionally, the cost of construction insurance, vehicles, fuel and almost everything else has risen.

As you might guess, these market conditions are also increasing project costs.

The Risks of Renovation

When you renovate your home, the risk of having a claim significantly increases. For example:

Having extra people around your property increases the risk of theft and other criminal activity.
Use of tools and equipment can inadvertently damage your home.
Unoccupied homes under renovation tend to be targets for vandalism and other crimes.
Increased foot traffic from workers and delivery drivers can increase the risk of an injury and other liabilities.

For these reasons, most homeowners policies are designed to limit coverage for certain scenarios including renovations. However, there are options to fill in the gaps of your standard homeowners policy:

Renovation Insurance: For a generally higher premium and some rating changes, homeowners can obtain coverage for renovation risks. Insurers may also ask homeowners to implement some loss prevention strategies. 
Builders Risk: Different from a standard homeowners policy, builders risk is used to cover a home that is under renovation and can cover personal property, loss of use and liability associated with a build.

As a homeowner, it’s important that you understand what your homeowners insurance policy covers during a renovation and what gaps you may want to fill before work begins. Talk to your agent to see if your insurance limits need to be adjusted to account for rising property values and the increased value of your property with the planned renovation. Also find out if your policy includes a separate construction deductible.

Best Practices to Consider

A big part of limiting risk involves hiring experienced and reputable contractors.

According to Contractor Connection, the top 5 mistakes homeowners make when hiring contractors are:

Not verifying that a contractor is licensed or insured: A professional contractor should have both a contractor’s license and a business license. Make sure your contractor carries both general liability and workers’ compensation insurance. Ask if subcontractors carry their own insurance or if the project will be insured with a wrap-up policy. 
Not checking references: Obtaining an idea of a contractor’s work history is important. Specifically, ask for a reference on a past project that is similar to your project.
Not obtaining an on-site quote: It is very difficult for a contractor to assess the cost of a project over the phone. Make sure they can see your home in-person.
Only considering bid price: Although you are saving money, you want to make sure the contract includes everything you are asking for at the quality you want.
Hiring a likeable contractor: Networking with professionals is important. But ultimately, the quality and service of the work completed is most important.

Taking these extra steps when hiring contractors for your home renovations are an important way to avoid hefty insurance expenses down the road.

Learn More

Changing market trends are having a significant impact on the construction sector. Insurance rate hikes are affecting the labor market, making it more expensive to hire contractors for home renovations. Now more than ever, it’s important for homeowners to understand their homeowners policy and consider steps they should take to avoid additional expenses during a home renovation.

Want to learn more? Contact a BNC insurance agent today to review your coverage.