With homeownership comes with a lot of unavoidable bills, whether it’s for renovations and repairs or basic necessities like homeowners insurance—which is surprisingly expensive stuff. On average, homeowners pay about $1,428 annually for every $250,000 of coverage, which works out to about $120 per month. When you buy a house and take out a policy to protect it, everything is based on an appraisal of your home’s rebuilding costs: that is, how much it would cost to replace it, more or less, as is. This means that every time you make a significant change to your home, you need to tell your insurer about it because you probably need to adjust your coverage, which can raise or lower your rates.
Even if you don’t want to see your insurance premiums go up, you should still inform your insurer.
Why homeowner's insurance rates go up
Some repairs or renovations you make to your home will raise the cost of your insurance—but that’s because they increase your home’s value, so you need more coverage. If your home will now require $50,000 more dollars to replace after a disaster, you need that extra coverage or you won’t get enough money in the settlement to fully replace what you had. A few examples of changes that can (and should!) raise your rates are:
Additions. If you add living space and increase the square footage of your home, you need to let your insurer know so the policy can be adjusted to accommodate for the extra cost of rebuilding those additions. This includes non-living spaces, like garages or sheds, that add value in other ways.
Finished spaces. If you bought an unfinished basement with a dirt floor and concrete walls and transformed it into a gaming paradise, you’ll want any insurance payout to cover it.
New pool. Pools are considered huge liabilities by insurance companies, so adding a pool to your home will definitely raise your insurance costs. Additionally, you should probably consider adding insurance if you install a pool—the Insurance Information Institute recommends an additional $300,000 to $500,000 of coverage.
Home business. If working from home means sitting at the kitchen table with a laptop, you probably don’t need to adjust your insurance. But if you start a home business that requires the installation of any sort of equipment, you should let your insurer know so they can determine if you need additional coverage—and higher rates.
Why homeowner's insurance rates go down
All is not doom and gloom when it comes to insurance rates and improving or repairing your home. If you make any of these repairs or renovations, definitely tell your insurer, because there is a good chance your costs will actually go down:
New roof. Replacing a roof will usually lower your rates because it protects everything under the roof more effectively. In fact, putting a new roof on the house can lower your premium by as much as 35%. And if your new roof includes safety and storm-resistant features, you might get additional discounts. It’s definitely worth looking into.
New windows. If you replaced your inefficient old windows that didn’t open all the way with shiny modern windows, you may very well get a break on your insurance costs due to the lower chances of storm damage and improved security.
Modernized infrastructure. If you have all the electrical and/or plumbing in your house replaced and upgraded, you might see a significant drop in your insurance costs. The older the original equipment, the more dramatic this can be. Upgrading your heating, cooling, and water heater systems can also result in lower premiums, so alert your insurer to these changes pronto.
Security. Added an alarm system? A camera doorbell? Your insurer will be delighted to hear it, and will probably give you a discount as a result.
Fire and flood systems. Installing modern smoke detectors, leak detectors, and flood mitigation technologies like a sump pump or automatic water shutoff lowers the chances that your home will be damaged or destroyed, so may result in lower premiums.
Your homeowners insurance will never be free, but you can definitely shave a few bucks off of it just by keeping your insurer in the loop. This way you get a better, safer house and a lower monthly bill.