Renovations that increase home insurance rates

A home renovation may increase the value of your home, but it can also drive up the cost of your home insurance. In addition to the expense of the renovation, you may see higher premiums if your renovation pushes you to increase your coverage limits or exposes you to greater liability.

1. Building a swimming pool

In certain locations, adding a pool to your home can increase its value and offer an incentive to would-be buyers. However, a swimming pool is considered an “attractive nuisance” (especially if it has a diving board or slide) and significantly increases your liability risk, which will likely increase your homeowners insurance premium. Plus, your insurance provider might require you to carry higher liability coverage or urge you to purchase an umbrella insurance policy. The insurance provider might require you to install a locking fence around the pool or may even decide not to provide coverage.

2. Adding an office for a home business

Working remotely has become more common, so adding an office could increase your home’s value if you are a remote worker or home-based business owner. However, it could also increase your homeowners insurance rates or require you to purchase an endorsement to increase coverage for business-related assets and equipment, or a separate home business policy that provides liability and protection against crime and worker injuries.

You may need to bolster your existing policy or purchase an additional business policy. You may have a few options, depending on your insurance provider:

  • Endorsement to your existing homeowners policy: This option would increase the existing limit on business property included in your homeowners policy.
  • Businessowners policy: This is a separate policy designed specifically for insuring a business, and it includes an array of coverages. Your insurer might require this if the company has a home insurance exclusion for business use of personal property.
  • In-home business insurance: This type of insurance features the same protection you would get if you were a larger company with smaller policy limits and premiums.

Regardless of the scope of your business, you should let your agent know if you have any business risk in your home, to make sure that you are covered properly.

3. Building on an extension

Sometimes a home needs to be changed to accommodate an expanding family. That can mean modifying a floor plan and adding more livable square footage. Expanding your space with new square footage will most likely increase your home insurance premium as you will need more dwelling coverage.

Before you begin renovations, you may want to speak with your insurance agent to discuss alterations to your policy. For instance, if you’re finishing a basement with new carpet, drywall, and insulation, your agent might recommend purchasing sewer backup coverage. Once renovations are complete, you’ll probably need an insurance reassessment to ensure your home has the coverage it needs.

4. Upgrading your kitchen or bath

Remodeling your bath or kitchen even modestly can give over 70 percent or 95 percent in recouped value, respectively, according to the 2024 Cost vs. Value Report by Remodeling Magazine. With these renovations, you might end up paying more for dwelling coverage since the upgraded materials are worth more and would cost more to replace. Before you sign off on the remodel, your insurance agent should be able to run the numbers to determine if you need to adjust your policy.