For a few years now, home renovations have been at an all-time high; from facelifts to additions, pool and patio installations, amongst others.
It is pretty common to see and hear construction going on in any neighborhood in Nassau County these days, said Rockville Centre Insurance Agent, Alex Anderson.
“Just driving around Rockville Centre, I've never seen this much work being done, even when I was a kid growing up in town,” said Anderson. “I don't remember seeing this many trucks and contractors around.”
With the unfortunate reality of rising construction costs, supply-chain issues and increasing labor expenses, Anderson stressed the importance of making sure your home insurance is keeping up.
According to national reports
from 2022, home renovations can total up to roughly $49,000, with most projects falling between approximately $17,800 to $80,400. If you are adding square footage or doing a gut renovation, be prepared to potentially spend well into six figures.
On Long Island specifically, a kitchen remodel can cost anywhere between $23,500 and $72,500, according to Sweeten
. Thinking of redoing the bathroom? Be prepared to spend at least $17,500 to $39,000
“As a rule of thumb, if you renovate and increase the value to rebuild your home more than five to 10 percent without notifying your insurance carrier or agent, you could run into problems if you have a loss,” Anderson explained.
Speak with your insurance agent before breaking ground
While the remodeling planning process should include proper budgeting, finding the right contractor and getting approval for the necessary permits, another step should be contacting your insurance agent directly to check if you should make any updates to your homeowners insurance policy.
While it all depends on the type of project, where your home is located, current real estate market trends and the quality of work, there are some specific improvements
that can significantly increase your home value and also replacement value, such as energy-efficient additions, kitchen and bathroom revamp, and outdoor enhancements.
If the renovations will increase the home replacement value significantly more than five to 10 percent and you are not living in the home during the work, then absolutely contact a qualified insurance agent because you may require a separate policy such as vacant home coverage or a Builder’s Risk policy. If you experienced a significant loss, your homeowners company could go as far as to deny any coverage.
Once your work is completed, your agent may go over some options if necessary. “There may be options, referred to as a Riders, that you can add on to your policy, which gives you an additional amount of rebuilding coverage. For example, say 20 percent of your current coverage on top of what you have now,” Anderson said. “This is where working with a qualified agent can really be valuable.”
An insurance rider is an optional add-on to an existing homeowners insurance policy that can help increase coverage limits, expand coverage for specific properties or extend protection.
Anderson recalled one client who told him he planned on building a large addition to the back of his house. There was actually a rider available on the current home insurance policy which allowed him to have sufficient coverage for the finished project.
“That kind of put his mind at ease,” Anderson said.
In other cases, if someone wanted to double the size of their house and decided to not notify the insurance company, Anderson said home insurance will pay through a replacement cost policy. This means paying to repair or replace damaged property without deducting or depreciation.
To put it simply — a homeowner can rebuild their house the same way it was structurally, except brand new. However, if a person is dramatically underinsured, a situation could arise where the insurance company may not be obligated to grant the replacement cost.
“You might have a depreciated value, which could be leaving a lot of money on the table, especially if you're underinsured to begin with,” Anderson added.
A home renovation could increase the value of one’s home, but also up the cost of home insurance — depending on the type of project. When making an appointment with an insurance agent like Anderson, be prepared to forward all records and receipts so they can accurately assess your needs.
“You don't want to run into a problem if God forbid you had a fire and you don't have enough coverage,” Anderson said. “Or, for example, the company pays your claim differently because you don't have enough coverage.”
More advice from Alex Anderson
Should I file a claim? Local insurance agent says not making small claims can save you in the long haul
Why New York auto and home insurance rates are rising so much in 2023
5 things that can save you money on your home insurance, according to this New York licensed agent
Auto rates in New York are going up. Here are 7 things you can do to lower your bill.