Do you update your home insurance agent of your home improvements? Why?

Question

(Afraid of increase in premium charges)

Answer 1

You should update your insurance company if your renovations make a signficant difference in the value of your home. That would be like adding a room or rooms, finishing out a previously unfinished basement, etc. A smaller project, like putting in new bathroom fixtures, won't make a noticeable difference in the value of your home and therefore wouldn't need to be reported.

Your insurance premiums may go up slightly, but it would be just that - very slight. And it would be small compared to the out-of-pocket amount it would cost you to replace a $30,000 room addition in the event of a fire or flood or some other kind of damage.

Answer 2

Yes you do need to update your insurance policy. Especially if you have a Replacement Cost policy. This means that you insure your home for the current market re-build cost, that is a different amount than an appraisal. If your home is a total loss and you do not help your agent keep the dwelling replacement amount current then you could be very under-insured. Check your policy and find out if replacement cost is applicable to your policy. Only you can make the choice of increasing but do weigh out the odds. How much of a loss could you afford out of your pocket if your home is under-insured?

Answer 3

Yes you should. The reason is suppose that the house was worth 200K but with new improvements is now worth 300K. You are still just insured for 200K so if the house burns down that is what you will get. I suggest you go look at your policy and see what you are insured for, then figure out the approximate value of your house with the improvements. Then if there is a big shortfall call him up and tell him to raise the insured amount ot whatever the house value now is.

Answer 4

The increase in premium is peanuts compared to the out of pocket expenses of rebuilding without adequate insurance.

Read my blog about my fire claims experience. I'm glad I didn't try and save a few dollars on cheaper insurance.

Also, if your policy coverage amount is TOO low (80% or less of replacement cost) your insurer can invoke several possible penalties: Coinsurance penalty where they only pay a proportion of the damage OR company may refuse to pay replacement cost and pays ACV of damages.
Say your coverage is for 70% of actual replacement cost since you added a wing to your house. In the event of a $10000 kitchen fire, you insurer can say they're only paying for 70% of damages OR they depreciate the kitchen and pay you ACV.
Call your insurer and get the policy updated.

Answer 5

you can if you want, but it is probably a waste of time:

1. unless you bought a long time ago, they probably already sold you way more insurance than you could ever collect (believe me, they tried;) keep in mind that the value of the home is not always going up. many places today, it is going down, e.g. detroit where the cost of a house structure including the land can be less than the scrap value of the lumber. what people usually worry about is protecting the total value of the property including the land, and most of the appreciation in most property is in the land, which normally cant be destroyed.

2. they probably wont pay your claims anyway because homeowners insurance is effectively worthless, unless you are willing to try and risk losing a very expensive lawsuit against the insurer. the grants of insurance are swallowed up by limitations on coverage and exclusions that render the policy illusory by any objective analysis. according to honest insurance agents, the only reason you are buying it is to appease your mortgage lender. but if you think about it, why would the seller of an illusory insurance policy be any more likely to recognize the claim of an additionally named mortgage holder than it would of the homeowner insured. when the insurance carrier denies the mortgage company's claim, the mortgage company proceeds in foreclosure against the primarily liable property owner.

if you dont have to buy it, dont. if you have a $50,000 p.d. or less claim against an insurance company, it would be a waste of time and money to bring it in most states because that is increasingly the cost of a lawsuit, which you could lose and most attorneys would not take a 50k p.d. case on contingency. (ca might be an exception because ca permits a tort liability measure of damages, including emotional distress, punitive and some attorneys fees for unreasonably withold benefits due under the policy.)

my personal take: if you have to buy it, get the cheapest your mortgage holder will accept, usually with a deductible. (you are going to take it in the shorts anyway if you have a loss, so do it cheaply.)

jmho.

Answer 6

If you don't update your insurance, you won't be covered for the full value of the home. If the home is destroyed, you want them to cover ALL the repairs, not just the value BEFORE the improvements.

Answer 7

No, they generally increase it all on their own according to some index. Always look at what your coverage is at renewal time. If you put a lot of updates in you want to be sure you are properly covered.