Should I Tell My Insurance Company About a Finished Basement or Home Remodel?
You finally finish the basement, remodel the kitchen, or add another room to your home.
The project looks great—but there is one more call you should consider making:
Your insurance agent.
Major improvements can increase what it would cost to rebuild your home after a covered loss. If your homeowners insurance still reflects the house as it existed before the renovation, your coverage may no longer match the home you actually have. The NAIC recommends reviewing homeowners coverage after remodeling or adding a room because these improvements can increase replacement cost.
Imagine You Finish Your Basement
Suppose you purchase a home with an unfinished basement.
A few years later, you spend $75,000 turning it into finished living space with:
Two Bedrooms
A bathroom
New flooring
Drywall and insulation
Built-in cabinets
A family room
A home theater
You never tell your insurance agent.
Then a major fire damages the home.
Your insurance policy was originally written based on an unfinished basement. But now the home would cost considerably more to rebuild because all of those improvements would need to be reconstructed.
That is exactly why your insurance should keep up with your home.
Your Home's Value Is Not the Main Issue
A remodel may increase the market value of your home, but that is not the primary concern for homeowners insurance.
The bigger question is:
How much would it cost to rebuild the home as it exists today?
Dwelling coverage is designed around reconstruction costs. Replacement cost generally reflects what it would take to rebuild damaged property using materials of similar kind and quality.
Adding finished square footage, upgraded materials, custom cabinetry, new bathrooms, or other improvements can increase that cost.
What Types of Projects Should You Tell Your Agent About?
You should consider contacting your insurance agent when making significant changes such as:
Finishing a basement
Adding a bedroom or bathroom
Building an addition
Remodeling a kitchen
Installing high-end flooring or cabinetry
Adding a garage or detached structure
Converting a garage into living space
Completing major electrical, plumbing, or HVAC upgrades
Even if you are not sure whether the project affects your insurance, it is better to ask.
Renovations Can Affect More Than the Dwelling Limit
Your dwelling coverage is not the only part of the policy that may need attention.
Homeowners policies also include coverage for personal property, other structures, loss of use, and liability. Some of these coverage limits may be calculated partly as a percentage of the dwelling limit.
A renovation may also come with new purchases.
A finished basement might mean adding new televisions, furniture, computers, exercise equipment, or other belongings. A remodeled kitchen might include expensive appliances.
Those changes are another reason to review the entire policy—not just the home's square footage.
What About a Remodel That Is Still Under Construction?
It is also a good idea to contact your agent before beginning a major renovation.
Construction can temporarily change the risks at your property, especially when walls are opened, major structural work is taking place, or the home will be vacant during construction.
Your agent can review the project and determine whether your existing homeowners policy remains appropriate or whether additional coverage should be considered.
Do Not Wait Until After a Claim
Updating your insurance after a renovation is much easier than discovering a coverage problem after a fire, storm, or other major loss.
Your insurer cannot go back after the loss and insure improvements that were never properly reflected in the policy.
The house you insure should be the house you actually have today—not the house you bought several years ago.
Let’s Review Your Home Insurance
If you have finished your basement, remodeled your home, added living space, or made other major improvements, now is a good time to review your coverage.
At Tommy Thomsen Insurance, we can review the improvements you have made and help make sure your homeowners insurance reflects the home you have today.
Request a homeowners insurance review through our website or call Tommy Thomsen Insurance at 801-982-7200.
We will explain your coverage in plain language and help you protect the improvements you have worked hard to make.
This article provides general insurance information and is not a guarantee of coverage. Replacement-cost estimates, coverage limits, renovation requirements, exclusions, premiums, and claim payments vary by insurer, property, policy, and circumstances of the loss.