3 Home Upgrades That Can Increase Your Insurance Costs

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  • Home insurance premiums are affected by many factors.
  • Some changes to a home can increase insurance rates.
  • This can include adding a pool or an addition on a home.

Don't upgrade your home without understanding how insurance costs will be affected.

Having sufficient home insurance coverage is crucial to protecting assets. A home is many people's most valuable possession and it's important to make certain it's fully covered. This means paying the necessary premiums for the right types of insurance protection

Many consumers assume once they've purchased coverage, they're all set. Sometimes, however, home upgrades can necessitate a change that raises insurance premiums. It's important to be prepared for that before remodeling to understand how an upgrade can affect insurance costs. 

In particular, here are three upgrades that consumers must be aware could raise their home insurance rates. 

1. Putting in a pool 

Adding a swimming pool can raise insurance premiums for a few reasons. 

First, consumers will need to make sure their dwelling and outbuilding coverage includes the pool. Otherwise, they would need to pay out of pocket if damage to the swimming area occurred -- which could cost tens of thousands of dollars. Consumers may need to add additional coverage and raise the amount of their dwelling coverage to make sure covered problems with the pool can be paid for by an insurer if something goes wrong.

Pools can also create an added risk of someone getting hurt on the property. After all, pools are attractive to trespassers -- including children -- and there's a risk of both guests and unwanted visitors drowning or otherwise becoming injured because of it. 

Homeowners insurance companies charge more for liability protection when there's a greater risk of loss caused by a pool. And homeowners may want to increase the limits of their liability policies to ensure assets are protected with this new hazard -- which can cause costs to rise even more. 

2. Adding space for a home business 

Many people have switched to working from home post-pandemic. For consumers who add a home-based office with specialized equipment, it may be necessary to get more insurance to make certain that gear will be covered. Standard policies typically limit protection for home-based businesses to around $2,000 to $2,500 by default, so buying more than this amount of coverage will raise premiums.

Homeowners insurance companies may also exclude liability protection for injuries related to the business, or may charge more for add-on coverage. It's important to make sure visitors are covered when clients come to a home.

3. Putting an addition on your home

Finally, adding a home addition or doing a major remodel can raise the cost to rebuild the property and thus necessitate a more substantial amount of insurance protection. 

Homeowners should typically have replacement value coverage for their home insurance in order to make sure their properties can be restored to the same structure in the event of major damage or in case the property is totally destroyed. A larger property with upgraded features or fixtures will naturally cost more to rebuild, so coverage limits will need to be higher and premiums will go up as well.

It's important for homeowners to understand how these changes affect insurance rates, and those who make these upgrades should alert their insurers ASAP to make certain they have the right protections in place in case something goes wrong.

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