How Does Home Insurance Change if You Upgrade Your Home?
There are certain changes you can make at home that can affect your home insurance. While some changes can raise your home insurance rates, others can lower them. It is important to keep track of how renovations can affect your rates so that you aren’t surprised by a sudden change in your premiums.
Safety upgrades to your home can actually lower your home insurance rates. This is because adding safety measures can lower the risk of a claim. Since your premiums are based heavily on your level of risk, a drop in risk may mean a drop in premiums.
Safety upgrades that can save you money on home insurance include updated fire alarms, anti-burglary systems, having a fire extinguisher, adding lights to your exterior, and more.
Are you considering adding a trampoline, hot tub or pool to your home? Be prepared for your home insurance premiums to possibly rise. Amenities such as pools and trampolines can raise your rates by raising the risk of an accident at home. Part of home insurance is liability, which covers bodily injury and property damage someone else may suffer at your home. Pools and trampolines can lead to breaks, strains, concussions, drowning and worse, which means your liability limits can change—along with your premium costs.
Interior Cosmetic Upgrades
Say you want to redo your countertops into a nice granite, or you want to replace your carpet floors with finished wood. Upgrades like these can change the over all replacement cost value of your home. This is the price on which your home insurance is calculated, so changing the value of your home can change how much you pay to insure it.
The replacement cost value of your home is not the same as its market value or how much you paid for it. Instead, the replacement cost value of your home is how much it would take to completely rebuild the home after a disaster, including building and material costs. For example, say you replace your countertops with granite that is worth $2,000 more than your previous countertops. This price should factor into your home’s replacement cost value, which may raise how much insurance you need. You can fail to mention this upgrade to your insurer, but that means that your new countertops won’t be covered if you file a claim.
Insuring for less than 80% of your home’s total replacement cost value, even with upgrades, can leave you with gaps in your coverage when it comes time to file a home insurance claim.
A home’s roof is one of its most important features. It is also one of the most expensive both to fix and to insure. Upgrading your roof can save you money on insurance, such as if you reinforce your roof to be weather-resistant. Roofing isn’t cheap, however, so you will have to budget carefully. Still, protecting your roof from weather damage can save you a lot of grief—and possibly a home insurance claim—in the future.
If a change is shallow and purely cosmetic, such as painting the exterior of your home a different color, you likely won’t see a change at all in your home insurance premiums. Insurers only care about changes that can affect your risk level or the replacement cost value of your home. While white homes may be easier to sell than blue homes, this doesn’t actually affect the home’s value, and thus shouldn’t affect the cost of your home insurance.
This applies to most landscaping, as well. Home insurance generally covers the dwelling and its contents, not those outside. Any trees you plant outside will not be covered by home insurance. The only exception may be fences, which can be used as a safety upgrade to protect your home and deter thieves. In this case, you may be able to save money by investing in a tall, secure fence and gate.
Other Factors that Influence Your Home Insurance Rates
While a lot of changes to your home can directly affect your rates, so can changes around your home.
For example, home insurance costs are partially influenced by how close you are to a fire department. The closer you are, the lower you may pay in premiums. This is because your proximity to a fire department lowers the response times during a fire and can minimize the damage caused by a fire in your home. If a new fire house is built near your home, you could see a drop in your home insurance rates.
Other basic factors include the home insurance claims of your neighbors, the increasing or decreasing frequency of natural disasters, the rate of crime in your area, changes in the cost of living in your area and more.