A desk covered in home blueprints, building materials and a laptop.

Does Remodeling Your Home Affect Your Insurance?

Updated April 1, 2024 . AmFam Team

Are you considering updating your home, like finishing your basement or installing a swimming pool? In the excitement of planning the updates to your home, make sure you know how a renovation or upgrade could affect your insurance.

A roof being placed.

Why does upgrading your home affect your insurance?

It’s actually pretty simple — when you make an upgrade to your home, you’re typically adding value to it – you’re increasing the amount of money it would take to replace your home. And your insurance needs to be able to reflect that change, so if your home faces damage, you’ll have the right coverage amounts in place.

Let’s say you upgraded your kitchen with granite countertops, custom-made cabinets and all new appliances, spending over $20,000. But your coverage limit included only your old kitchen, which had laminate countertops, generic cabinets and old appliances. If your house was destroyed in a fire or other disaster, your existing coverage might not be enough to rebuild it just like it was before.

A happy couple looking at their home's blueprints.

What kinds of upgrades affect your home insurance?

There are a number of upgrades and renovations that affect your home insurance. Take a look at a few of the most popular types:

A newly remodeled home basement.

Finished basement. Are you thinking of turning your basement into a man cave or additional living space? That’s great! But keep in mind that finishing a basement means more property and structure that needs to be covered by your insurance, so you’ll want to let your insurance company know of your addition in order to have the proper coverage amount.

You might want to consider adding sump pump failure and water backup coverage for your finished basement, too. If your sump pump system ever fails or the power goes out, water overflow may occur. And damage from this type of event isn’t typically covered by your standard home insurance policy. This may not be a big deal for a basement that’s not finished, but imagine if your new carpet, furniture, electronics and other features were destroyed. It could get expensive to cover the cost to repair or replace the damages.

A happy couple cooking in their newly refinished kitchen.

Remodeling the kitchen. A kitchen remodel is one of the most common home renovations — and one of the most expensive. But the money you’re putting into the remodel means your home’s value could boost significantly. You’ll want to make sure your home’s replacement cost is updated with your insurance company. This may cost a little more in the short term, but you’ll feel better knowing your home is properly covered if something were to happen.

Workers fixing a roof.

Getting a new roof. Since your insurance company typically takes into account the age of your roof when determining your insurance cost, replacing your roof may affect it. But here’s the good news: you could earn a discount if you choose to install impact-resistant roofing. You’ll also want to consider how having replacement cost value coverage (RCV) will better cover you than actual cash value coverage (ACV). If your roof is damaged by things like wind, snow, or hail, RCV will cover you for the full amount it would cost to replace your roof, while ACV would only pay you what your roof is worth today, taking into account its age and condition. Find out more about RCV versus ACV coverage.

Two happy kids swimming in a pool.

Installing a pool. Bring on the sunshine and barbecues! Adding a swimming pool is great for friends and family to enjoy, but you’ll want to make sure your insurance company knows about the addition. Take a look at key info you’ll want to know about insurance for your swimming pool.

A happy man taking a break in his home office, leaning back in his chair.

Adding a home office. Are you turning an empty room into a home office for your home-based business? It’s never been easier to run a small business from the comfort of your home, but before you do, you’ll want to understand how to safeguard your investment from the unexpected. Many entrepreneurs think their small home business is covered by their home insurance policy. But the truth is, if you’re conducting business from your home, you’ll likely need to add home business coverage, which will extend the liability limits and coverages of your home insurance to your small business. Learn more about small home business coverage to better understand why you need this protection.

A father working on his laptop at home while holding his young child.

Does home insurance cover renovations?

If you’re renovating or making an addition to your home, make sure to have the appropriate coverage in place to protect your dwelling while it’s under renovation. Find out more about insuring your home while remodeling it.

A happy working on their home laptop together.

Are there upgrades that can lower my home insurance?

There are also home improvement projects that could lower your home insurance premiums. For example, if you replace the electrical and plumbing systems in your older home, you could qualify for the renovated home discount. If you install a home security system or other qualifying smart devices in your home, you could earn a smart home discount, too. All great ways to lower your home insurance cost!

No matter how big or small the addition to your home may seem, it’s important to understand that any upgrade to your home isn’t complete until you’ve let your agent know about it. Scheduling a personal insurance review every year is a great way to ensure you’re properly covered from the unexpected. Connect with your American Family Insurance agent and schedule yours today!

This information represents only a brief description of coverages, is not part of your policy, and is not a promise or guarantee of coverage. If there is any conflict between this information and your policy, the provisions of the policy will prevail. Insurance policy terms and conditions may apply. Exclusions may apply to policies, endorsements, or riders. Coverage may vary by state and may be subject to change. Some products are not available in every state. Please read your policy and contact your agent for assistance.

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