7 Renovations That Can Impact Your Home Insurance – Home renovations are exciting! They can increase your comfort, modernize your living space, and significantly boost your home’s market value. However, before you knock down any walls or install that new luxury fixture, it’s crucial to understand how your project will affect your homeowners insurance policy.
Renovations change your home’s value, its replacement cost, and sometimes, the risk it poses to an insurer. Failing to inform your provider about major updates can lead to inadequate coverage or, worse, a rejected claim. In the nextsection, we will list the 7 Renovations That Can Impact Your Home Insurance.
7 Renovations That Can Impact Your Home Insurance
Here are seven common renovations that you absolutely must report to your insurance company.
1. Kitchen and Bathroom Upgrades
These are the two rooms where replacement costs can skyrocket fastest. When you upgrade appliances, countertops, and cabinetry, you are often increasing the Replacement Cost of your home.
Standard policies cover the cost to rebuild your home as it was. If you replace laminate countertops with high-end marble or install custom, commercial-grade appliances, the cost to replace those items after a fire or disaster will be far higher than what your current policy accounts for. You’ll need to increase your dwelling coverage limit to protect this new, higher value.
2. Adding a Room or Increasing Square Footage
Any renovation that permanently increases the overall size of your home, such as building a sunroom, converting an attic or basement into livable space, or adding a second story, will immediately impact your insurance.
This type of project directly increases the Total Dwelling Value and the Cost of Construction per square foot. The insurer will need to re-evaluate the risk based on the new structure’s materials and size. If you complete an addition and don’t update your policy, you will be significantly underinsured, meaning your insurer will only pay a fraction of the cost to rebuild the entire, larger structure.
3. Installing a Swimming Pool or Hot Tub
Adding a pool or a permanent, in-ground hot tub is one of the most significant changes you can make to your liability coverage. These features are considered “attractive nuisances“ by insurance companies because they dramatically increase the risk of accidental injury (or drowning).
To protect yourself, you will need to substantially increase your Personal Liability Coverage limit, and your insurer will likely require you to meet specific safety standards, such as installing a secure, locking fence around the perimeter of the pool. Failure to comply with these safety requirements could invalidate a claim if an injury occurs.
4. Major Electrical, Plumbing, or HVAC Updates
While these are often invisible improvements, they can significantly affect your premiums, sometimes in a positive way.
- Positive Impact: Replacing old, outdated systems (especially fuse boxes, knob-and-tube wiring, or galvanized plumbing) with new, modern components (like a 200-amp circuit breaker panel and copper piping) reduces the risk of fire and water damage. This can sometimes lead to reduced premiums as the insurer views your home as less of a risk.
- Negative Impact: If you add major appliances or convert to a high-demand system (like a geothermal heat pump) without updating your electric panel, the insurer may flag the electrical load as an increased fire risk.
5. Basement Finishing and Renovations
Turning an unfinished basement into a functional living space, like a guest suite or media room, has a dual impact on your policy. First, it increases your home’s Overall Replacement Cost.
Second, and more importantly, finished basements are highly susceptible to water damage from sump pump failures or sewer backups. Your standard policy typically does not cover these events. You will likely need to purchase a Sump Pump/Sewer Backup Endorsement to adequately cover the expensive finishes and personal property (like furniture and electronics) now located in the basement.
6. Installing Solar Panels (Renewable Energy)
Solar panel installations affect your policy in two main ways: property coverage and liability.
- Property Coverage: The panels themselves are expensive to replace. You need to ensure your Dwelling Coverage includes the cost of the entire system (unless it’s leased, in which case the leasing company handles the insurance).
- Liability: If the panels are roof-mounted and they cause an injury to a contractor or a visitor, or if they start a fire, the resulting damage or lawsuit falls under your liability coverage. The insurer needs to know about this high-value, fixed-location item.
7. Upgrading or Replacing Your Roof
The roof is your home’s primary defense against the elements, and its condition is a major factor in determining your premium.
Replacing an old roof, especially one nearing the end of its lifespan, with a new, high-quality material (like Class 4 impact-resistant shingles) often qualifies you for a significant insurance discount. Insurers know that a newer, stronger roof reduces the likelihood of wind and hail damage claims. If you’ve paid for a new roof, make sure you send the insurer the paperwork—it’s one of the few renovations that reliably lowers your premium.
Conclusion
The golden rule of home insurance is simple: when in doubt, call your agent. Any renovation that changes your home’s structure, value, use, or risk profile should be reported.
While it may result in a slightly higher premium, paying a little more for appropriate coverage is always better than facing a catastrophic loss only to find your policy limit is thousands of dollars short of the true cost to rebuild or repair. Informing your insurer before, or immediately after, a major renovation ensures your financial safety net remains strong.
