Can home improvement projects lower your insurance rate?

Some home improvement projects may lower your insurance rate, but these are typically projects that make your home safer and reduce the risk of a claim. Roof replacements generally earn you a lower rate since the age of your roof, and the material it's built from are key cost factors for your dwelling coverage. Other projects, such as additions or renovations, may increase the value of your home but come with a higher insurance rate to cover the increased cost of repairing or rebuilding your home.

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Home improvements that may lower your homeowners insurance rate

These projects may help lower your homeowners insurance rate, but keep in mind that insurers use a variety of rating factors to determine your rate and may not offer the same discounts.

Replacing your roof

Replacing your roof is one home improvement project that may lower your rate, especially if your current one is getting up there in years. As your roof ages, the materials start to break down and pose a greater risk of leaks and water-related damage. If your roof uses asphalt or wooden shingles, then you may save even more by switching to a more durable material, such as metal or slate. Learn more about how roof type impacts your homeowners insurance.

Upgrading your wiring

If your home has outdated electrical wiring, such as knob-and-tube wiring, then upgrading to modern Romex wiring may reduce your premiums. Outdated wiring generally has a higher risk of causing a fire, so replacing it with modern wiring can save money and make your home much safer. Likewise, upgrading your electric service and breaker panel to handle modern appliances and electronics could make your home more attractive to potential buyers.

Have an older home? Learn why older houses may have higher insurance rates.

INFORM YOUR INSURER OF MAJOR HOME IMPROVEMENTS

You should always give your insurer a heads up about any major home improvement projects that may raise or lower your insurance premium. Some insurers require you to do so, but it's worth doing either way so you have adequate coverage to repair or rebuild your home with your new addition, room renovation, or other improvements factored in. Plus, you may earn discounts for some home upgrades.

Making your home storm-resistant

There are a few ways to make your home more resistant to damage from wind and hail, which may help reduce your insurance rate:

  • Hurricane straps or ties: These are metal connectors that reinforce the connection between your roof truss and your walls, countering high winds that could tear your roof off.
  • Impact-resistant shingles: These are engineered to resist damage from hail, offering more protection for your roof.
  • Storm-safe windows: Replacing your windows with impact-resistant glass and installing roll-down shutters can reduce the likelihood of glass damage during a storm, protecting the interior of your home.

Home improvement projects that may raise your insurance rate but may still be worth it

Building an addition

A home addition increases your home's value and adds to its square footage, which means your dwelling coverage will likely need to increase to reflect the additional cost of repairing or rebuilding your home. However, the boost in home value can make this project worthwhile, regardless of whether your insurance rate gets a boost, too. Plus, your family gains a ton of additional living space without the hassle of moving.

Adding a room, finishing a basement

Any project that adds another useable room to your home will likely increase your home's value, which means your dwelling coverage should go up along with it. But just like an addition, adding more square footage to your house is generally worth the possible uptick in your insurance rate.

Remodels and renovations

Room remodels and renovations are a common way to boost your home's value, though they may also bump up your insurance rate. This is especially true if you use higher-quality materials, like tile flooring over vinyl, or granite countertops over laminate. Better materials increase the cost to repair or replace them in the event of a claim, so your dwelling coverage (and rate) may go up as a result. Still, remodels and renovations are great ways to increase your home's value, so a potential bump in your insurance rate shouldn't stop you.

Adding a sump pump

A sump pump collects and pumps excess water from around your home's foundation, keeping your basement dry. While installing a sump pump probably won't lower your insurance rate, some insurers may offer a discount for installing a battery backup for your pump, which can keep it running during a power outage. Even without a discount, a sump pump is worth having to prevent water damage, especially if your basement has flooding issues. Homeowners insurance generally doesn't cover flood damage, but you can usually add coverage for sewer backups or sump pump overflows.

Installing solar panels

Solar panels can add value to your home, shave dollars off your electric bill, and provide peace of mind during power outages. However, since they add to the cost of rebuilding your home, they may also raise your insurance rate. Roof-mounted panels are usually covered under your dwelling coverage, while panels on top of a detached structure, such as a shed, fall under "other structures" coverage, aka Coverage B. Learn more about how homeowners insurance covers solar panels.

Replacing your siding

Your home's siding protects the structure of your home from the elements, so replacing it can reduce the likelihood of damage. However, it may increase your rate, especially if you opt for more expensive siding options, like stone or brick. The more expensive the materials, the more dwelling coverage you'll need to cover the cost of repairing or replacing it in the event of a claim. Learn more about homeowners insurance coverage for siding.

Home improvement projects that usually increase your rate

Installing a swimming pool, hot tub, fountain, or pond

Swimming pools, hot tubs, and water features are known as "attractive nuisances," meaning they're a potentially hazardous feature of your home that attract trespassers, especially little children. Since these features increase the risk of a child injuring themselves, insurers usually charge a higher premium for liability coverage. You may also need more dwelling, other structures, or personal property coverage to cover the cost of repairing your pool, hot tub, or water feature if it's damaged by a covered peril. Learn more about homeowners insurance coverage for swimming pools.

Adding a fireplace

A wood-burning fireplace or stove will likely increase your insurance rate since they present a greater risk of a house fire. However, gas-burning fireplaces may not affect your rate at all since experts consider them to be safer. Learn more about fireplaces and their impact on homeowners insurance.

Building a treehouse

Treehouses are also considered attractive nuisances, so your insurance premium will likely increase to cover the additional risk of injury.

Does homeowners insurance cover home renovations?

Home insurance can cover you for injuries or theft that occur during your home renovation, but it doesn't pay for actual home renovation projects. Your policy is there to cover the cost to repair or rebuild your home after it's damaged or destroyed by a covered peril, and only up to the condition it was in before it was damaged. Any improvements you made to the house prior to the damage may be covered if you updated your policy accordingly, such as increasing your dwelling coverage limit to account for higher-quality building materials, an addition, etc.

Updates you should make to your homeowners insurance during construction

If you're planning a major construction project, like a home addition, you might want to revisit your personal property limit. Homes undergoing major home renovations can be targets for criminals, so ensure any belongings in the home are adequately covered.

You may also consider increasing your personal liability coverage in case someone gets injured during renovations. Your contractor's commercial insurance policy should cover any injuries their workers suffer. However, a lapse in their coverage could ultimately fall on your shoulders.

If you're knocking out an exterior wall or adding a second story, you may even consider purchasing builders risk insurance if you're concerned about the level of coverage provided by your contractor's insurance. Your insurer can help you determine any additional coverage you may need while your home is under construction.

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