Remodeling? Make Sure Your Insurance is Up to Par

According to the BuildFax Remodeling Index (BFRI), remodeling reached a record high during the month of July. The company attributes this to the many who are choosing to stay put and invest in home improvements, as opposed to putting their home on the market.

The latest BFRI indicates that residential remodeling activity registered the 21st-straight month of year-over-year gains, demonstrating that many Americans are continuing to remodel their current homes. The data shows July 2011 as the month with the highest level of remodeling activity since the Index was introduced in 2004.

When it comes to remodeling your home, there are important insurance issues to take into consideration. For example, if you are planning on adding onto your home, evaluate the materials used. Wood-framed structures are highly flammable and will cost more to insure, whereas cement- or steel-framed structures will cost less because they are less likely to succumb to fire or adverse weather conditions.

Once your addition or remodel is completed, it’s critical to make sure your insurance is in line with your home improvements. Many homeowners neglect to calculate the increased value of their home caused by a remodel/addition and secure the necessary coverage. If you have a "guaranteed replacement value" policy, which all homeowners should, noting the new value of your home post-remodel is essential.

In all cases, the following steps can help you save money on rates:

• Install a security system. A burglar alarm that is monitored by a central station, or that is tied directly to a local police station, can help lower a homeowner's annual premiums by 5% or more.
• Install additional smoke alarms. Smoke alarms are another way to reduce your homeowners' insurance premiums. While these are standard in most new houses, installing them in older homes can save the homeowner 10% or more on annual premiums. Make sure you add the necessary number of smoke alarms to correspond with your remodel or addition.
• Raise your deductible. Like health insurance or car insurance, the higher the deductible you choose, the lower the annual premiums will be. This will mean, however, that you’ll need to foot the bill for smaller home repairs that don’t meet your deductible.

Whether you have remodeled or not, be sure to review your home insurance policy at least once a year and make note of any changes that could lower your premium, like a burglar alarm, sprinkler system or even the disassembly of a trampoline. Neighborhood changes could also affect your rates, such as the addition of a fire hydrant within 100 feet of your home.

As a Member of the Top 5 in Real Estate Network®, I have a wealth of real estate and homeownership information that may be of help to you. Feel free to contact me any time to learn more about this important information, and be sure to forward this article on to any friends or family that may be interested as well.