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How Home Improvements Can Affect Your Insurance (It’s Not Always an Increase!)

As a homeowner, you might dream of a renovation or a remodel, but you’re unsure how it would impact your insurance costs. That’s understandable; hiking your monthly insurance premium could add unwanted financial stress on top of renovation costs, mortgage payments, and other life expenses.

But while some home improvements can lead to increased homeowners insurance premiums, some can lower premiums. Plus, upgrades can raise your home’s value and allow you to customize your space to suit your unique needs, preferences, and style.

This article discusses how different home improvements can affect your insurance rates. Read on to learn which improvements can raise your monthly premium and which might lower it.

Additions That Can Lower Premiums

Home improvements can often score you a lower homeowners insurance premium. Below are some examples of projects that can shrink your monthly premium costs.

Safety and Security Improvements

Enhancing safety and security in your home can reduce its risk of burglary. Generally speaking, insurance companies prefer lower-risk properties since they are less likely to lead to claims.

For example, if you install deadbolts and a full security system, including a burglar alarm, in your home, you will be less likely to file any insurance claims due to theft. Your insurer may reward this reduced risk with a discount. Likewise, smoke detectors and fire alarms reduce your likelihood of filing fire damage claims and can lower your premium.

The following safety and security enhancements can reduce your premium prices:

  • Burglar alarm
  • Deadbolts
  • Fire alarm
  • Full security system

Different types of improvements will score different levels of discounts. For example, a fully monitored security system might reduce your monthly premium more than a new set of deadbolts.

Structural and Durability Upgrades

Your home’s roof is one of the most important factors in determining your homeowners insurance premium.

An aging roof can lead to water damage, mold issues, structural problems, or even roof collapse should snow or ice pile up on a weaker area of the roof. If your home has an older roof, your insurance company might charge a higher premium in anticipation of costly claims related to roof damage.

Fortifying or replacing your roof will likely warrant a lower premium; in fact, replacing your roof can reduce your insurance premium by 5%-35%. However, you may not have to do a full roof replacement to save money on your insurance premium. Implementing stronger roof materials and other reinforcements can do the trick, too.

In addition to making your home more structurally sound, more watertight, and cheaper to insure, upgrading your roof can also make your house more energy-efficient.

Energy Efficiency and Infrastructure Upgrades

An older electrical system can put your home at a greater risk of electrical fire, and older plumbing systems increase the risk of water damage. Since electrical fires and plumbing-related water damage are some of the most common homeowners insurance claims, these risks can have a big impact on your monthly premium.

Riskier electrical systems include older electric aluminum and knot-and-tube wiring, which may not suit modern kitchen appliances. If you upgrade your home’s aging electrical system to copper wiring, your insurance company may reward you.

Older plumbing materials like lead and clay are considered outdated and can raise risks of plumbing problems. You might save on homeowners insurance if you replace outdated plumbing materials or preventative devices like sump pumps, water leak sensors, or automatic shutoff tools.

Installing a newer, more energy-efficient water heater or HVAC (heating, ventilation, and air conditioning) system can also slash your insurance premium.

Additions That Could Raise Premiums

While some home improvements can reduce your insurance premium by protecting your home against damage, other projects can increase risks and, in turn, homeowners insurance costs.

Luxury Additions

Home additions like pools, spas, and extensive landscaping are considered “luxury” upgrades and can lead to a spike in your monthly insurance premium. Though luxury additions can boost your home’s value, they can also increase risks and liabilities, translating to higher insurance costs.

Adding a pool, spa, or fountain to your home raises the risk of someone getting injured on your property, requiring you to purchase more liability insurance and pay a higher premium overall. If you opt to add a water feature anyway, make sure to follow safety guidelines and best practices for maintenance.

Extended Structures

Adding an extension to your home, finishing your basement, building a deck, or adding a new detached structure can increase your property’s value. However, these projects will also lead to increased insurance costs since it generally costs more to insure more and larger structures.

Also, if you add an extended structure and plan to fill it with furniture and art, you may have to purchase more personal property coverage.

If you want to build onto your home or add another structure to your property, talk to your insurer about your plans ahead of time. You may be able to work with your provider to keep premium increases at bay.

The Importance of Keeping Your Insurer Informed

If you’re planning to take on any major home improvement projects on your property, make sure to keep your insurer in the know. Your insurance company may work with you to help you plan for or reduce premium increases. They may also discount your homeowners insurance, depending on the details of your planned project.

Plus, you do not want to end up underinsured after investing in a renovation. Informing your insurer of any major alterations to your home will ensure your hard work is properly covered.

Though some home improvements can lead to higher premiums, the projects may pay off in the long run since renovations can secure your home, raise its value, and make it more energy efficient.