Building or remodeling a home is a big project with lots of little details. It doesn’t take much to disrupt the schedule – or the budget. That’s why construction insurance is so important. The right policy can limit your exposure to risks like unexpected costs, injuries, or liability. And it can give you the confidence you need to move forward with tough design decisions.
Before you get started on your project, it’s smart to get familiar with your insurance policy. That way, if anything unexpected happens, you’ll know where to look for help. Here are a few things you should know:
- Take a look at your homeowner’s insurance
Homeowner’s insurance policies are typically not intended to cover remodel projects. If you suffer losses during your project, your policy may not cover the entire loss, whether big or small. And since construction projects are prone to take unexpected turns, it’s especially important to take a close look at the language in your contract and be aware of any coverage limitations.
- Find out if you need course of construction insurance
Course of construction insurance provides coverage for a home or building while it is being built or renovated. If you’re just doing a small remodel, the insurance company might not require that policy. Instead, your project could be classified as a minor renovation, and the insurance company might tack on a surcharge until the project is complete.
- Learn about property coverage restrictions
As a homeowner, you need to tell your insurance agent about renovation plans before you start your project. Otherwise, you might risk limited coverage – despite what your policy says. You might face the following coverage restrictions if you don’t work out a plan with your insurance agent before construction begins:
- Value cap. Failure to notify your insurance company of a home project could result in a cap that is limited to the stated value of the home, not the cost to rebuild it.
- Depreciated value. You might only receive the depreciated value of the damaged contents, not the full replacement value.
- Higher deductible. A major home project could result in a much higher deductible, up to 5% of your home’s value (e.g., a $75,000 deductible on a $1.5 million home value).
- Save money with the right security systems
If you’ve been waiting to upgrade, replace, or install safety features, a remodel is a great chance to do it for less. Since your interior walls might already be exposed and your tools are out, installing security features just makes sense. Your insurance agent could recommend system upgrades aimed at preventing catastrophes, such as:
- Seismic gas shut-off valves
- Water security systems
Aside from peace of mind, these upgrades could also significantly reduce your homeowner premiums, making it a win-win for everyone.
- Take safety seriously
Safety is no joke on a construction site. Insurance companies take serious precautions to help mitigate the risks that accompany renovation or building projects. Requirements may vary depending on the job, but typically include:
- Central station burglar and fire alarm
- Fire extinguishers
- Fire-proof storage cabinets
- Exterior lighting and fencing
Your insurance company will also need to review the insurance information for all general contractors and sub-contractors working on site to confirm liability protection. Any potential surcharges should be removed from the policy once the project is finished. Then, your insurance company will re-inspect the dwelling to ensure it reflects the project and replacement value.
- Communicate with your agent
You can avoid the pitfalls that can create gaps in coverage. From carefully reading through your policy, to talking about an upcoming job with your insurance company, taking the right steps can be the difference between the home of your dreams – or a remodeling disaster. Before your project, consult with an independent insurance agent to make sure you’re getting the best coverage at the best price.
If you have any questions about your coverage for a current or upcoming project, please reach out to Holly Long at Holly.Long@theabdteam.com.