A remodeled home not only improves the looks and enhances comfort, but also earns a higher valuation. In such a case, will the existing home insurance coverage suffice? Do the renovations have any impact on your existing home insurance policy?

Yes, it does. While minor changes will not have any major impact on your policy, renovations in the nature of constructing a swimming pool, remodeling a kitchen, and expanding the living area are major changes which leads to a significant change in the valuation.

Increased Valuation Necessitating a Higher Policy Coverage

home insurance

During the course of home renovation, if you choose to lay luxurious tiles and fittings, add a modular kitchen, or convert your home into a smart home, such additions will significantly increase the value of your home. The existing home insurance cover will not suffice, exposing you to the risk of loss in case of any damage.

So, it is necessary that you inform your insurer about the proposed renovations and have a revaluation done to decide on the ideal coverage. Of course, a higher cover will entail higher premium payout. But, this is a small price to pay when compared to the loss you might suffer if any disaster strikes.

What is Covered and What is Not?

There are a good number of inclusions and exclusions when you sign a home insurance policy. Make sure to read the terms and conditions in fine print, it is always prudent to check with the home insurance provider on what is covered and what falls outside the ambit of the policy.
There are a handful of factors that determine the coverage. These include:

  • Location of the house and its age.
  • Renovation which is in the nature of increasing the liveable floor space is not covered in the existing policy. The valuation of the additional space has to be added to the sum insured. Before you go ahead with the addition, the proposal for renovation has to reach the insurer.

  • Kitchen and bathroom remodeling are renovations which add value to the existing house and hence, the insurer has to be informed to make a reassessment.

Girl in a jacket

If the insurer has been kept in the dark about the renovations and if any disaster strikes, your house insurance policy will be rendered null and void. It is always prudent to inform the insurer about the intended renovation well before the commencement of work. It is also best to provide photos and records to validate the alterations/remodeling.

It is best that you talk to your insurance agent before you plan to carry out the renovations. The agent will help you to determine the additional coverage. Also, he can quantify the liability cover needed during the renovation period.

Replacement Cost of Valuables

The home includes not just the brick and mortar structure; but also your personal belongings. These personal belongings take the shape of furniture, appliances, gadgets, and other valuables. When you choose an insurance policy, ensure that it covers the replacement cost of the valuables. You will be indemnified by the policy to the extent of the depreciated value and replacement cost of the asset.

Renovation automatically increases the value of your home and so does the addition of personal belongings. To keep your home and belongings well covered, make sure that the enhanced value is added to your home insurance policy. To know more about home insurance policies, visit the Bajaj Finserv website.

Author's Bio: 

Arwind Sharma is a financial advisor with an experience of more than 7 years. He has worked for topmost financial firms in India and has been a visiting faculty at many reputed institutes in India.