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Living Smart: Are You Properly Insured for Remodeling?

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By Angie Hicks

Insurance concept -  house under umbrellaThere are many topics more exciting than homeowners insurance, I’ll grant you that. But since your house is likely to be your biggest asset, it’s wise to periodically examine coverage, to ensure that you’re adequately covered against damage and liability.

This is especially important if you’re planning a major project, such as remodeling, rebuilding or building new.

Anytime you hire a contractor to work on your home or property, take time to verify that they and any subcontractors are appropriately insured, as well as licensed and bonded. While it’s a good idea to ask for a contractor’s certificates of insurance, an even better practice — because certificates can be faked or altered — is to contact the insurers to confirm coverage. Some experts recommend that contractors carry at least $1 million in coverage for each insurance type.

Meanwhile, highly rated insurance providers tell us that you should consider an extra step: Get yourself named as an “additional insured” on the contractor’s general liability policy. This ensures you’re fully covered against liability for damage that can occur during your project, such as workers breaking a water line that causes a neighbor’s property to flood. Getting yourself added to the policy may cost you little or nothing. Also, it means the insurer will alert you if the contractor’s policy lapses.

It’s important to realize that some home improvements can affect your homeowners insurance premium or coverage. For example, a major kitchen remodel could mean that your home would cost more to replace in case of disaster. Many policies include a replacement cost endorsement that guarantees sufficient coverage to rebuild your home. It’s a good idea to periodically review your homeowners coverage, to be sure you have replacement coverage and that the amount is in line with current costs.

Another renovation-related insurance consideration arises if you transform an unused room into a home office. Standard policies rarely extend coverage for accidents, theft or other hazards that can happen on property used for business. If this is a concern, talk to your insurance company about extending coverage or buying a separate policy.

It’s important to inform your agent or insurer when you make significant changes to your home. Building a pool, for example, is likely to raise your insurance rates because it probably will increase your liability risk as well as your home’s replacement cost. However, some upgrades might reduce premiums. This can happen if you improve an older home’s wiring, roofing or plumbing.

The typical homeowners insurance policy is not sufficient to cover risks associated with building or rebuilding a home. Top-rated insurance experts recommend that you take out a builder’s risk policy to insure your property and on-site building materials during construction.

For instance, if half of your house was destroyed, a typical homeowner policy will cover the intact half and a builder’s risk policy would cover what’s being rebuilt. Agents will base the builder’s risk policy cost on building plans and estimated construction costs.

If you’re in the market for home-related insurance, be sure to get quotes from several companies that have good ratings from both consumers and from independent rating organizations.

Angie Hicks is the founder of Angie’s List, a resource for local consumer reviews on everything from home repair to health care.

Distributed by MCT Information Services

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