The Ten Myths about Insurance People Believe

Home Renovation

The dreaded home remodel, you want the result, but going through the hassle is an entirely different thing altogether.

Don’t fret, you’re in pretty good company, U.S. homeowners spent $130 billion on home renovations in 2014. In fact, nearly 75% of all homeowners are expected to undertake some type of home improvement this year.

So you’re not alone in your misery. :-)

If you’re thinking of a home improvement project this year, take a minute to review this 5-step checklist to make your project goes smoothly:

Step 1: Establish a budget

Renovations are much cheaper than buying a new home, but still, you need to be practical. You don't want to break-the-bank on your home remodel project.

Before you start your project, scrutinize your current monthly budget. Look for areas where you can conserve spending, allowing you to contribute more to your project budget. You may even want to look for coupons and deals to save money on household expenditures, freeing up more money to contribute to your home improvement fund.

It can also be very useful to setup a separate savings account specifically for your home improvement project.

Since home improvement projects rarely come in under budget, you should consider building-in a 10% cushion for contingencies.

Step 2 - Sketch out your plans

You’ll want to consult with an expert as you begin planning your project. A contractor can help you understand how your plans might affect the home’s overall structure. This is much more important if there is major demolition involved, as you may impact load bearing walls or critical areas of the foundation.

Some architects may offer a design consultation to discuss your plans, and may even sketch a few options for you. If needed, these sketches may even be useful as blueprints for a contractor to formalize construction plans.

Important Note: some projects provide a significant return-on-investment, but others don’t. Before you start a major project you need to understand if the investment is work the expense. Sometimes more minor changes are sufficient. You can find some useful information from Remodel Magazine’s list of 35 common projects, with the annual cost versus the value.

Step 3 – Consult with an insurance agent

This is our favorite step in the process. :-)

In all seriousness, if you’re going to undertake a home improvement project it’s a good time to speak with your insurance agent. You want to make sure your home is properly insured during the construction process.

The first you’ll also want to confirm that your homeowner’s insurance policy doesn’t have an exclusion for “course of construction.” If you’re home insurance policy carries this exclusion, then you may need to issues a course of construction policy.

Also, a frequent misunderstood is that structural and functional changes don’t affect your home insurance coverage. But it does. For example, adding a home security system may decrease premiums … that one is easy to understand.

Other changes may result in the need to increase your coverage. For instance, a home office may require a specific endorsement for an in-home business, or even require a commercial general liability policy.

In the case of a remodel, if you add square footage, upgrade kitchens or bathrooms, change from carpet to wood flooring, these are all things that alter the replacement cost of your home. The cost of a builder grade kitchen is just not the same as a gourmet kitchen.

When you alter your home, you need to re-evaluate the replacement cost to assure that you have adequate replacement cost coverage for your dwelling coverage (Coverage-A).

Step 4 – Do you DIY or call a contractor

Just because you can YouTube how to do it, doesn’t mean that it’s a good idea to undertake a project on your own. Sure, some project are suitable for the weekend project warrior.

Some minor projects do, however, make a lot of sense to undertake on your own. And even some intermediate projects, like siding, minor plumbing fixes, and even a laminate floor, can be done for significantly less as a “do-it-yourself” project.

However, if you’re not certain of your ability, you should hire a professional. Even though it may cost more, the money saved in time and mistakes can make a DIY project much more expensive in the hands of an inexperienced carpenter.

Step 5 – Get references from friends and family

As you kick-off your search to find a reputable contractor for your home renovation project, don’t be bashful, ask your friends and family if they have any referrals. There is a good chance that someone has already undertaken a project, and you can glean some useful information or a valuable recommendation.

It makes sense to get at least three bids before deciding who to hire. And be extremely cautious not to select a contractor just be because they had the lowest bid … you just may get what you pay for.

“You’ll also want to ensure that they carry worker’s compensation and liability insurance in case someone on their staff gets injured on the job,” said Petro. “This is very important, because if your contractor doesn’t have sufficient insurance then you could be left holding the bag if a worker is injured while working on your property.”

Once you’ve chosen a contractor, be open to their recommendations for suppliers because these are often their professional contacts and may be great sources for less expensive materials. Be sure to agree upon a timeline and contract that clearly outlines when and how materials will be paid for, as well as when the contractor gets paid. Don’t pay for everything up front and keep the dialogue going throughout the process to guarantee the project is ultimately completed to your satisfaction.

Conclusion

Follow these useful steps and you’ll improve your chances of getting your home renovation project completed on budget, done correctly, and with the confidence that you have the proper home insurance before, during and after your project.

And once everything is all done … enjoy your new home!

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