When planning a home addition, such as building a new room or expanding your living space, it’s important to consider how this upgrade might impact your home insurance rates. While increasing your home’s square footage can enhance its value and make it more functional, it can also lead to changes in your insurance premiums and required coverage. Let’s explore the specifics of how a home addition could affect your insurance, what steps you should take during the process, and how to ensure your property is properly protected as it evolves.
Why Home Additions Affect Insurance Premiums
A home addition directly increases the replacement value of your property. Insurance companies determine your premium based in part on how much it would cost to repair or rebuild your home after a loss. By expanding your living space with a new bedroom, finished basement, or sunroom, you are increasing both the amount of coverage you need and the potential risk for the insurer. Most policies require that your dwelling coverage reflects at least 80% of your home’s replacement value, and a significant addition will almost always necessitate an adjustment in your coverage.
Common Additions and Insurance Implications
Certain types of home additions, such as new rooms, attached garages, or finished basements, generally require you to increase your dwelling coverage. Other additions, like a deck or a detached structure (garage, workshop, or accessory dwelling unit), will affect your “other structures” coverage. Here is how different projects typically impact insurance:
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If you add a swimming pool, you increase not only your home’s value but also your liability risk. Many insurers require higher liability coverage, and you may need to install additional safety features such as fences or alarms.
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Expanding rooms or building new levels increases your reconstruction cost and may raise your premium.
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Adding a home office could require additional coverage, particularly for business equipment or increased foot traffic due to clients or deliveries.
Renovations That Could Lower Your Insurance Rates
It’s not all about higher costs; certain upgrades might actually lower your premiums. Improvements related to safety and durability can reduce risk in the eyes of insurers. These might include:
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Upgrading your roof with impact-resistant or modern materials, which may reduce the likelihood of damage from wind, hail, or snow.
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Updating electrical wiring and plumbing to current code, minimizing the chance of fire or water damage.
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Installing security systems or fire protection features like sprinklers.
Ask your insurance provider about possible discounts if you incorporate these elements into your project.
Keeping Your Insurance Aligned With Home Renovations
Before your addition begins, talk with your insurance agent and provide details about the scope, costs, and timeline of your custom home construction or renovation. This documentation is essential both for accurate coverage during the project (such as through builders risk insurance) and post-renovation. Request a post-project reassessment to ensure the new value of your property is covered, and confirm that all new features and upgrades are included in your policy. If you have to vacate your home during a major job, you may need additional coverage, such as vacant home insurance.
Work With Insured Contractors for Peace of Mind
It is equally important to choose a contractor who carries proper general contracting insurance. Ask for a certificate of liability coverage before work begins. This protects both you and your contractor in the event of accidents, injuries, or property damage during the addition project.
Make Informed Updates to Your Home Policy
For Bozeman-area homeowners planning a home addition, the best practice is to consult with your insurance provider before breaking ground and again after the addition is complete. Keeping your insurance up to date gives you peace of mind and ensures that your investment is fully protected.
Ready to Add On? Contact CS Structures Today
If you are considering a home addition or major renovation in Bozeman, MT, CS Structures provides professional design-build services and the experience you need for a successful project. Our team is committed to helping you build a beautiful, functional space while ensuring you understand how the changes may affect your home insurance. Call us today at 406-624-6670 or fill out our online form to schedule a free consultation.
Olivia Gillies