This Week's Q & A

Q: I am planning a fairly extensive remodeling job and intend to do at least some of the work myself. Will I require any additional insurance of any kind during the construction process?

A: That’s an excellent question, and one that, unfortunately, all too few homeowners bother to ask. There are two insurance-related issues you need to consider:

	Liability and/or damage during the remodeling process; and
	The increased value of your home after the remodeling is complete.

On the latter point, bear in mind that most insurance companies require homeowners to insure their homes up to 80 percent of replacement value; if the coverage ratio falls below that amount, you may not be able to collect full compensation for any damages you incur. Now consider that one of every four remodeling projects increase the value of the home by at least 25 percent, according to insurance industry statistics, and you begin to appreciate the scope of the problem. If you update your home, you also should update your insurance coverage.

That’s rule number two. Rule number one is, take a careful look at the coverage you have and the coverage you need before the construction project begins. Ask your contractor to provide a certificate of insurance for your remodeling project. The certificate should specify the coverage dates and the nature of the remodeling work involved. You also want to insist on at least 30 days’ notice before the insurance is canceled and make that requirement a provision of the contract you sign. Show a copy of the contractor’s insurance certificate to your insurance agent, who can asses whether the coverage is adequate and identify any risks that aren’t fully covered.

If you are planning to do some of the work yourself, make sure your existing homeowners’ coverage is adequate. Ask your agent specifically if you will need a “builder’s risk policy.” That will be a requirement if a friend or relative is doing the work. And if you enlist more than two friends or relatives to help with the project, you may need a “personal liability umbrella policy,” which will provide liability coverage beyond what a standard homeowners policy affords.

The Independent Insurance Agents of America (IIAA) offers the following additional advice for remodelers:

	If you tear down walls, replace windows, chimneys, etc., or otherwise open your home to the elements, review your policy for theft and weather damage liability. A standard homeowner’s policy may not cover weather damage or theft losses that occur during construction, because the homeowner created the risk exposure.
	Make sure you clarify up front whose insurance is responsible for uninstalled appliances, cabinets, carpet and other additions. Your contractor should have a builder’s risk policy or an “installation floater” that covers these items.
	Check with your insurance agent if you are planning to leave your house for an extended period during the renovation. Some policies have a vacancy clause that limits or revokes coverage if the owner leaves the premises vacant for more than 30 days. If your policy has such a provision, ask you agent about purchasing a vacancy endorsement, to ensure coverage while you are gone.