7 Home Renovations that Raise Insurance Premiums

Statistics say installing a pool increases the risk of a serious injury on your property, for example, leading to higher premiums. Trampolines, treehouses, and even a home office can also raise rates (or lead to a denied claim).

Here are 5 home renovations that could raise your insurance premiums.

Installing a Swimming Pool or Hot Tub

You may have heard swimming pools increase insurance premiums. That’s true.

Generally, homeowners can expect premiums to jump anywhere from 5% to 15% when adding a functional pool.

Insurers know pools increase the risk of accidental injuries, drowning, and lawsuits. Some insurers require fencing, locked gates, or safety covers on the pool before even insuring your property.

Sometimes, even a hot tub or spa increases premiums.

Insurers aren’t being greedy: approximately 300 children die in residential pools each year, according to the United States Consumer Product Safety Commission. Thousands more are injured in and around pools.

Adding Treehouses, Trampolines, & Playground Equipment

Building a backyard playground for your family may sound like an amazing idea.

As you may have guessed, however, insurers see certain equipment as an added risk and may increase premiums:

• Typically, insurers don’t raise premiums for small plastic playgrounds and basic equipment.
• Large custom-built playgrounds, however, could force you to buy additional liability coverage.
• The more elevated platforms or hard surfaces you have, the more likely your premiums could rise.
• Trampoline claims could be excluded entirely (many homeowners insurance policies have specific trampoline exclusions).

Slides, swings, climbing walls, zip lines, and custom play structures increase the risk of injuries on your property, and your insurer could raise premiums in response.

Building a Home Office

So you want to start a home-based business. Great! Unfortunately, it could lead to higher insurance premiums.

As soon as you start running a business from home, your insurer sees your home as a commercial risk, not just a personal residence.

A typical homeowners insurance policy covers some home-based business losses – typically around $2,500 worth of equipment damage. Damage beyond that amount, or damage caused by clients on your property, however, could lead to a complicated insurance claim without extra coverage.

If your home-based business has any of the following, then you may need a separate commercial insurance policy or endorsement on your residential policy:

• Business equipment stored on site (Especially equipment worth more than $2,500, as it may not be covered by your residential policy)
• Foot traffic from customers or clients
• Extra liability exposure (say, if you’re selling products or performing services that could injure customers)
• Specialized equipment or high-value inventory

If you’re concerned about coverage, contact your insurer and ask about a business rider or endorsement. Sometimes, you’ll pay a few extra dollars per month for the coverage you need. In other cases, you’re better off with a full commercial policy.

Adding Square Footage

Adding square footage to your home seems like a prudent move. Maybe you have room for a new addition. Maybe you’ve expanded the area above your garage into a living space.

Even if you do a major renovation by the books, your premiums could rise. After all, your home may be 5%, 10%, or 20% bigger after the renovation. Your home could also be more valuable. That means higher risk for your insurer.

Some renovations that add square footage and impact insurance premiums include:

• Garage conversions
• Sunrooms
• Second-story expansions
• Other room additions and expansions

Finishing a Basement

Depending on your area, a finished basement may or may not count towards square footage.

Regardless of whether or not it counts towards square footage, however, a finished basement increases insurance premiums.

When you finish your basement, you’re adding value to your home, increasing the cost of repairing your home in the future.

Basements are also more prone to major insurance risks, like:

• Flooding
• Sewer backups
• Sump pump failures
• Mold

When your basement is unfinished, these issues could be serious, but not “$30,000 insurance claim” serious. After you finish your basement, risk changes significantly.

Upgrading to High-End Finishes

Maybe you replaced your old linoleum with upscale hardwood. Maybe you imported stone for that luxurious look.

Whether it’s custom millwork, high-end cabinetry, or designer lighting, certain high-end finishes can increase homeowners insurance premiums.

Remember, your homeowners insurance company doesn’t just cover the structure of your home; it covers everything from your flooring to your cupboards. The higher-end these finishes are, the more it costs to rebuild your home after a loss, potentially leading to higher insurance premiums.

Why Premiums Rise After Renovations

You just renovated your home. You added value. You should be excited. So why do premiums rise?

Generally, premiums rise because the renovations fall into one of the following categories:

1. Increase the chance of someone getting hurt (higher liability risk)
2. Increase the cost of rebuilding your home (higher replacement cost)
3. Introduce fire, water, electrical, or structural hazards
4. Add expensive materials, appliances, or possessions that are costly to replace
5. Introduce non-covered items or complications to your home policy (say, with a home-based business or trampoline)

That doesn’t mean you should avoid renovations. However, it does mean doing your research today to avoid insurance headaches in the future.

Final Word: Contact your Insurer After Renovations

A major renovation is exciting. It can also lead to future insurance claim complications – especially if you don’t tell your insurer.

If you’re unsure about the impact of a new renovation, contact your insurer (remember, your insurer may be using drones to check your backyard and roof already, so hiding a major project isn’t a good idea).

If your insurer is denying or reducing a claim because of your home renovation, contact ClaimsMate for a free claim review.

We’re experts in navigating tricky claims, and a free consultation could be the difference between a successful and failed claim.

Stephanie Corona

Stephanie is a property insurance claim expert with over 20 years of experience working as an insurance adjuster, expert witness, appraiser and umpire. She is passionate about sharing her expertise, knowledge, tips and training to help both property owners and Public Adjusters in their pursuit of effectively managing claims and recovering the claim settlement they deserve after a loss.