Desirable location: check. Good infrastructure: check. Quality school districts: check. Neighbors you can stand: check. What if you have all this but your house is no longer the perfect fit? Maybe the bathroom's too small, you'd like to finish that room over the garage or perhaps you have another child on the way and you're going to need lots more room. What do you do?
Is it time to remodel, or is it time to buy a new home and move?
There are a lot of economic factors to consider in your decision, and insurance should be included in that list. Knowing how your home insurance company operates will make you a better homeowner whether you decide to improve the home you live in or find a new one.
Buying a new home
In short, insurance companies love new homes. They are built to the latest codes and ordinances and use the latest materials, making it less likely that issues will occur. For example, leaky plumbing that can cause considerable damage to a structure is far less likely in a new home than in an older one. New plastic composites used in today's construction are practically crack and break proof, dramatically reducing the chance of a big leak.
Additionally, people have a tendency to treat new things with more care than they would with something they've owned for a while. Remember when you got that new car? At the beginning, you probably swore never to eat inside it or leave bags of stinky gym clothes or beach chairs in it, right? Well, the same goes for a new home. We tend to be more gentle with new homes - we don't want to mess up the carpeting, ding the paint or crack a window. Believe it or not, insurance companies keep that in mind.
Finally, most new homes are generally built in lower crime areas. Builders want to sell the homes, so they are not going to invest their time and money in locations that are going to be a deterrent for buyers. Insurance companies look at crime rates when it comes to writing your policy.
Completing a remodel
What if you just don't want to move for one reason or another? Maybe you want to wait until your kids finish high school, you are involved in your neighborhood association or just have sentimental connections to your home. Whatever the reason, consider your personal connection to the home first before remodeling.
Then, it's important to think about the size and scope of the remodel. If you are going to redo the upstairs bath, knock out a wall between the kitchen and the dining room or another smaller project of this scope, then you don't need to call your insurance company before you begin work (but you'll need a policy reassessment once the work is complete).
However, if you are looking to add significant square footage or even vacate your home while major renovations are completed, you need to consult your insurance agent first because you might need a builder's risk policy. This policy takes into account the fluctuating value of your home during the construction period (elements of the home will be inhabitable), the fact that building materials will most likely be on the property and the future higher "replacement value" of the home.
If you leave your home during renovations and rent another residence while your primary one is under construction, you might need a renter's policy too. Both of these additional policies are written separately while your homeowner's insurance remains in place. Once the construction is complete, the primary policy is revised for the new value.
If this is the route you'd like to go, these are the questions that your agent will have for you when you contact him or her. The more you can answer, the smoother the steps to begin remodeling will be:
- How much square footage is going to be added/involved in the remodel?
- What are the general construction lines you have in mind?
- Do you have construction plans?
- Are you going to stay in the residence during the construction phase?
It's up to you … but you have help.
Basically, it comes down to this: are you planning to sell in a few years or are you looking to live in your home permanently? Contemplate the idea of a "good investment" versus a "lasting legacy" for your family.
Whether you decide to purchase a new home or remodel your current one, consulting with your insurance agent can help you answer some important questions. Ultimately, you want the feeling of satisfaction with your home, and taking these questions into account can help you achieve it.
Ryan Hanley is the Vice President of Marketing at TrustedChoice.com and the Managing Editor of Agency Nation. He is also a speaker, podcaster and author of the Amazon best-seller, Content Warfare. Ryan has over 10 years of insurance expertise and blogs frequently to help consumers understand complicated insurance topics.