Home Additions & Insurance: 3 Projects That Increase Premiums

One of the joys (and headaches) of home ownership is embarking on the remodeling projects that will turn your house into your dream home.

While no one expects an addition or a remodel to their house to be cheap (even if you do plan to do most of the labor yourself), there is one expense that many homeowners overlook when planning their new additions: insurance premiums.

The following are three home additions that can continue to cost you long after the sawdust has cleared:

1. A swimming pool. We all dream of relaxing by the pool in the backyard. And in many areas of the country, the addition of a swimming pool can really raise your property value.

However, once your pool is installed and ready for laps, you’ll also find yourself sending heftier checks to your insurance company.

This mostly stems from the increased potential liability you face by owning a pool. You will likely see a rise in your premium that reflects your increased liability needs.

It’s also important to note that while your basic home insurance policy does cover injury and damages, the limits on that coverage will often not be enough for homeowners with pools. Many homeowners will need to also purchase umbrella insurance in order to be fully covered.

On a similar note, if you buy a trampoline, the same thing is going to happen. The insurance company is going to view the trampoline as a major risk.

Sure, they are a fun way to pass a summer afternoon, but having kids (and adults) fly through the air is not the best way to get cheap homeowner’s insurance protection.

2. A finished basement. Making your basement into a rec room or home theater is a very popular way of increasing the usable square footage of your home. But increasing your home’s finished footprint will also raise your insurance premium.

That’s because finished and unfinished portions of the home are covered at different rates, which makes sense when think about the difference between what you find in a living room and what you find in an attic.

On top of that issue is the question of flooding. Very few homeowners policies cover flooding, although some will take care of damage that resulted from a broken pipe but not other types of flooding.

You may need to buy or beef up your flood insurance policy to make certain your finished basement is completely covered.

3. An additional room. You may have always dreamed of adding another bedroom or a sunroom to your home. You know that it will be expensive to add on an entirely new room (or extend an existing one), but don’t forget the additional costs after you’ve finished construction.

The added square footage of your home will add to the value of your home, meaning that you will have to pay more in homeowners insurance.

In addition, don’t forget that additional space in your home also means additional furniture, artwork, electronics, appliances, etc, which means that value of your personal property has gone up along with the value of the house.

All together, that will mean your insurance will need to go up.

Saving Money on Homeowner’s Insurance

If you’ve added one or more of the things above, you could be facing much higher insurance rates. Nobody wants to pay more for homeowner’s insurance than they have to.

There are some quick and simple ways you can save money on your homeowner’s insurance coverage.

One of the quickest ways to do this is by raising your deductible.

The deductible is the amount you have to pay out-of-pocket before the insurance coverage kicks in. The higher the deductible, the less you’ll have to pay every month.

Another way you can cut down your premiums is to bundle your insurance policies.

If you don’t have your auto insurance and homeowner’s insurance at the same company, give your agent a call about having them with the same carrier. In most cases, insurance companies give a small discount for people who have more than one policy.

Looking for even more ways to save money?

Get a security system.

The insurance company is going to calculate your premiums based on how much risk your home is for the company. If you lower the risk, they will reward you with cheaper rates.

Adding a security system, dead-bolt locks, and much more can lower your rates by as much as 20%.

It’s going to be a little of an investment to install these things, but it will pay off in the end. Plus, extra security will give you peace of mind knowing you and your family are safe.

Making a few of these quick tweaks can save you hundreds of dollars on your insurance coverage. You can do most of these things in less than a day. Take the time to do the work and you can find yourself with a lot of extra money.

The Bottom Line

Before beginning any major home improvement project, make sure you sit down with a calculator and determine not only the construction costs, but also the maintenance and insurance costs (this is also a good time to shop around for homeowners insurance rates).

You would hate to finish your dream home and then find that you can’t afford it.