In certain locations, adding a pool to your home can increase its value and offer an incentive to would-be buyers. However, a swimming pool is considered an “attractive nuisance” and significantly increases your liability risk, which will likely increase your homeowners insurance premium.
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Homeowners might choose to renovate to create more living space, update their home’s design or even put in a pool. Whatever the reason, homeowners may want to consider if their renovations could impact their home insurance policy. Some renovations may prompt you to adjust your coverage types or limits, while others may actually save you money on your insurance premium. Bankrate’s insurance editorial team explores how some popular home renovations may impact your home insurance rates.
Renovations that increase home insurance rates
A home renovation may increase the value of your home, but it can also drive up the cost of your home insurance. In addition to the expense of the renovation, you may see higher premiums if your renovation pushes you to increase your coverage limits or exposes you to greater liability.
1. Building a swimming pool
In certain locations, adding a pool to your home can increase its value and offer an incentive to would-be buyers. However, a swimming pool is considered an “attractive nuisance” and significantly increases your liability risk, which will likely increase your homeowners insurance premium.
A standard homeowners insurance policy usually includes liability coverage, which is designed to help cover medical costs for a person injured on your property and legal expenses if you are sued. However, an insurance agent may recommend that a pool owner opts for higher liability coverage than what is standard. Homeowners might also consider purchasing an umbrella insurance policy, which provides additional liability coverage for greater financial protection if a covered claim exceeds the homeowners liability coverage amount.
Your insurance carrier may also require a locking fence around the pool and/or a locking safety cover to go over the water when the pool is not in use, which can drive up the cost of installing a swimming pool. If the pool has a diving board or slide, it will likely be considered a greater potential hazard by your insurer, and it may decide to not provide coverage or charge a much higher premium to offset the higher liability risk.
2. Adding an office for a home business
Working remotely has become more common, so adding an office could increase your home’s value if you are a remote worker or home-based business owner. However, it could also increase your homeowners insurance rates or require you to purchase an endorsement to increase coverage for business-related assets and equipment, or a separate home business policy that provides protection against crime and worker injuries.
Most homeowners policies protect equipment for home-based businesses up to about $2,500, though you may be able to increase this amount, depending on the company. That might not be enough for a business owner who uses specialized machinery or stores large amounts of supplies or inventory at their home.
Some carriers may include a home insurance exclusion for business use of personal property in your home, so be sure to talk to your agent if you have work-use items in your home and make sure you have the right level of coverage. Additionally, homeowners insurance companies might not cover liability related to the business.
3. Building on an extension
Sometimes a home needs to be changed to accommodate an expanding family. That can mean modifying a floor plan and adding more livable square footage, like finishing a basement or attic. In other instances, a new addition may be in order. Expanding your space with new square footage will most likely increase your home insurance premium as you will need a higher level of dwelling coverage.
You might need more post-renovation insurance even if the added space is not inside your house