There's a church in Chicago that was having its roof replaced some years ago, after an extensive remodel. Just as the workers were putting the finishing touches on the roof, a fire broke out and destroyed a good portion of the church. It's the kind of thing that happens over and over again -- you start a remodeling project, only to wind up calling your insurance agent when something goes awry.
That's why if you're considering remodeling your home, you've got to make sure your homeowners insurance is in order. Even small home improvements can affect the cost of rebuilding your home in the event of a fire or other disaster, so make sure your coverage is current.
The reality is this: the cost to rebuild your home could be much more than the resale value. According to Travelers Insurance, key factors that impact the cost to rebuild your home include square footage, style of home, exterior wall construction, number of kitchens and baths and garage type.
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Account for special features. Special features like fireplaces, porches and skylights also factor in, as do finished basements, additions and in-law apartments. The quality of materials used throughout the home also count towards the rebuilding cost, so remember to indicate to your insurance company or carrier whether you're using builder-grade tile and cabinets or high end marble and cherry wood in your kitchens and baths.
Before starting a home remodel, contact your insurance agent to increase the coverage on your house to reflect the higher value of the rebuilt or upgraded structure. Eileen Baisden, vice president at Travelers, advises homeowners to provide their agents or insurance companies with the specifics of the remodel -- what products you're using, where in the home the project is happening, etc. -- to make sure they get the right coverage.
Baisden also says it's important that homeowners keep their insurance company updated on the progress of the project in case plans change and a different level of coverage is needed. And, if you're remodeling a vacant home, be sure your agent knows that as well. Vacant home coverage is different from general home insurance, so if something goes wrong and no one is living in the home, you could be out of luck.
Verify your contractor's insurance, too. It's not just your insurance you need to worry about. Make sure to verify your contractor's insurance coverage to avoid liability if someone is injured on your property. Ask your contractor for proof of adequate liability and workers' comp coverage, and ask for a copy of both the contractors' and subcontractors' policies. "Hiring workers who aren't insured for liability or workers' comp carries risk," says Baisden. "Contractors and employees may injure themselves while on the job -- and might sue you."
Keep track of all running projects. The amount your coverage increases depends on the project you're doing, but small jobs add up. Keep a running list of all small and mid-size projects you complete -- new counter tops, special windows and doors and flooring, for example. Each year, when you renew your policy, factor in these small jobs in addition to bigger projects when calculating the cost of your home.
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You may qualify for discounts. There's an added bonus to keeping track of all your improvements. Some, like upgrading electrical systems, replacing your roof and installing fire alarms, could mean you qualify for discounts on your homeowners' insurance policy. Be sure to follow up with your insurance agent or carrier once you've completed any of these projects to find out if they can save you money.
"It's all about re-evaluating your insurance needs to align with changes in your life, no matter how big or small," Baisden reminds homeowners. "Make sure you're having regular conversations with your insurance agent or carrier about your coverage to help ensure it accurately reflects your current situation and that you are in the best possible position for being appropriately covered in the event of loss or damage."
Ilyce Glink is an award-winning, nationally syndicated real estate columnist, blogger and radio talk show host, and managing editor of the Equifax Finance Blog. Follow her on Twitter @Glink.