Remodeling Homeowner Insurance After a Major Remodel

Your hardwood floors are in, your granite countertops are shining, and your new appliances are running with high-tech efficiency. You have finished your home remodel at last. Or have you?

If you recently completed a major renovation, odds are you’re not only basking in the beauty of your remodeled home, but you’re also enjoying a substantial increase in the value of your property. The results are in: Remodeling magazine’s 2006 “Cost vs. Value Report” indicates the job cost for a major kitchen remodel averages $54,241. The boost to a home’s resale value varies by location, ranging between $38,884 and $58,004. Nationally, homeowners are recouping fully 80% of kitchen remodeling costs at resale.

The benefits of renovating your home make the expense an intelligent investment, but protecting that investment is paramount. That’s why you should consider remodeling your homeowners insurance as well.

Renovations often result in homeowners insurance coverage shortfalls in two areas: dwelling protection—which involves structural improvements to your home—and personal property protection. Build-in enhancements such as new windows, doors, custom cabinets, granite countertops, bars, islands, and flooring need to be brought to the attention of your insurance agent. You also should discuss any major personal property purchases, including appliances, furnishings, and decorator curtains and blinds.

When insuring personal property—especially appliances and electronics—check to see that your policy covers replacement value of your property, rather than the actual cash value. The actual cash value consists of the replacement cost of an item less the amount it may have depreciated. Appliances and electronics depreciate quickly. The amount your homeowners insurance will pay for a depreciated item usually is not enough to replace it with a new one. Unless you enjoy cruising the thrift stores, you should opt for replacement value. That way you can shop at Circuit City instead of the Salvation Army.

Keeping your homeowners insurance agent in the loop is a good practice in general, but a major remodel should prompt an immediate conversation. If something happens tomorrow, you want to make sure your homeowner’s insurance will replace what you have today—not what you had yesterday.