Remodeling your home is an exciting experience. You are taking your home and turning it into something you have always wanted it to be. Some individuals tend to buy a home and do a series of remodels throughout the years so that they can have the home they always wanted. In other words, they do their remodels as their budget will allow.

In the meantime, the value of the home most likely goes up. This is good news for the homeowner because the remodel investment pays off. It pays off in that they increase the amount of equity in the home. If there is a refinance in the future, then the homeowner can take advantage of this equity. And if the home is to be sold one day, the increase in value, once again, benefits in the way of equity and allows for a successful sale.

However, you own the home and this means that you have the very important homeowner's insurance on your property. This is great because that means that if something were to happen to your home, you could have it repaired or replaced. There are some things that you need to keep in mind, though.

Remodeling and Homeowner's Insurance

Your homeowner's insurance pays for repairs and home replacement up to the value of the home. This is established when you open your policy. So when you sign up for your homeowner's insurance, your premium payment is going toward a specific amount of coverage. So what do you do when your home value goes up and you need to choose new proper coverage limits?

If your home value goes up due to remodeling, then you are not going to have enough homeowner's insurance coverage to cover the value of your home. If a fire, flood, or another incident were to occur, you would only receive reimbursement for the policy limit. So if your house was worth $125,000 before the remodel and it is now worth $150,000, your homeowner's insurance is only going to cover $125,000 of the home's value. That means you are not going to receive anything for the $25,000 in additions.

$25,000 is a lot of money to not receive compensation for. This would mean that your remodel was more or less done for nothing. This is something that has happened to homeowners in the past since it is hard to predict disaster.

Filling the Gap

When you have completed your remodel, you want to make sure you increase your homeowner's insurance to cover the improvements that you made. That way you don't have the large gap between what you are covered for and the actual value of your home. This will save you a significant amount of money if a disaster strikes.

You may want to have an appraisal of your home done after you have finished your remodel. You can then contact the insurance company and tell them of the new value. If you don't want to do the appraisal, that is fine. The purpose of the appraisal is to prevent you from overpaying for your coverage.

You don't want to cover for $125,000 if your home's value is $120,000. You'll never receive the excess if something were to occur to your home. The insurance company will pay up to the value of the home as long as it is within your limits.

So when you are doing the very much desired remodeling on your home, make sure you report the final value of your home to your homeowner's insurance company. You'll be glad you did if the worst happens and you need to make repairs or even rebuild your home. You'll receive the right amount of money.

safe secure

Enter your zip code for affordable home owners insurance quotes


What People Are Saying

"This was the easiest thing I have ever done online. I just answered a few questions and a few minutes later I was contacted by insurance companies competing for my business. Great job with the web site, it was a breeze."

- Damon K, Monterey CA