Protect What’s New: Insurance for Home Renovations
Maybe it is time to make some changes in your home. Renovations and extensions can make it a better place to live. Not only that, they’ll likely increase your property value. Still, renovating costs money, and the construction is a pretty penny as well. If something happens, you might need builder’s risk insurance to cover the damage. How does that coverage function, and why do builders need it?
Those who plan to make home renovations need to verify that they have builder’s risk coverage. It can often prove instrumental in paying for losses sustained during the construction.
Why Renovations Need Builders Risk Insurance
Many homeowners mistakenly think their home insurance will pay for damage during renovations. That’s often not the case. Construction projects add new items to the home. They are not adequately reflected in existing homeowners insurance. Most policies don’t cover losses to these projects. That’s where builder’s risk insurance can step in.
This coverage protects projects under construction. Let’s say, for example, that a severe storm damages your home, including a bathroom that you are remodeling. Coverage can help pay for the construction materials lost in the event. Events that qualify for coverage often include weather, fire, theft, vandalism. Other protection might exist. You can usually find this coverage adequate to protect mishaps that occur with new construction.
Setting Your Policy Limits
When you plan a renovation project, you’ll likely need to buy materials to complete it. The value of these items is what needs protection by builder’s risk coverage. You’ll need to get a policy that reflects this dollar amount. To set that limit, look at your construction budget and anticipated costs. You’ll likely need to get at least the value of the budget in coverage, and it often helps to get higher limits.
Keep in mind, builder’s risk coverage will always come with exclusions. If you don’t enlist a licensed contractor on your project, your policy might not honor your claim. Other exclusions include tools, mechanical breakdowns, and items left exposed to weather. In some cases, you can add extensions to your policy for some of these items, like scaffolding.
So, as you plan renovations, contact an insurance agent to get builder’s risk coverage. Don’t start a project until you have an active policy. Remember, when the project gets done, your policy will likely lapse. When you complete the work, add the new value of the home to your existing homeowners insurance.