Few things are more exciting than improving your home. Whether you’re adding a new kitchen, finishing a basement, building a pole barn, or expanding your living space, renovations can make your home more enjoyable while increasing its value.
What many Northern Michigan homeowners don’t realize is that home improvements can also create unexpected insurance coverage gaps.
If your homeowners insurance hasn’t been updated during or after a renovation, you could discover after a loss that your policy no longer reflects the true cost to repair or rebuild your home.
Here’s what every homeowner in Traverse City, Suttons Bay, Elk Rapids, Acme, and the surrounding Northern Michigan communities should know before starting their next project.
Why Home Renovations Can Affect Your Insurance
Your homeowners policy is based on several factors, including your home’s size, features, construction materials, and estimated rebuilding cost.
When you make significant improvements, those details may change.
Common projects that can impact your insurance include:
- Kitchen remodels
- Bathroom renovations
- Room additions
- Finished basements
- Attached or detached garages
- Pole barns and outbuildings
- Decks and patios
- New roofing
- Custom woodwork or built-in cabinetry
- Solar panels
- Home offices
- Swimming pools or hot tubs
Some improvements increase the cost to rebuild your home, while others may introduce new liability or property exposures.
Renovations That Often Require an Insurance Review
Home Additions
Adding bedrooms, bathrooms, or expanding your home’s footprint typically increases its replacement cost. If your policy isn’t updated, your dwelling coverage may no longer be adequate if your home suffers a covered loss.
Kitchen Remodels
High-end cabinets, quartz countertops, custom appliances, and premium finishes can significantly increase rebuilding costs compared to what your policy originally contemplated.
Finished Basements
Finishing a basement often adds drywall, flooring, electrical work, plumbing, and built-in features that should be reflected in your coverage.
Pole Barns, Detached Garages, and Workshops
Northern Michigan homeowners frequently build detached garages, workshops, or pole barns for recreational vehicles, boats, tools, or hobbies.
These structures may need additional coverage, especially if they’re larger or used to store valuable equipment.
Keep in mind that your insurance already is accounting for like kind and materials. If you replace carpet with carpet, that is already factored into your home’s replacement cost. However, if you replace laminate countertops with granite, there is an additional cost to that exchange of materials that was not factored into your home’s repalcement cost and must be added.
A general rule of thumb: If you spend $10,000 or more in remodeling your home, contact your agent to discuss.
Don’t Forget About Personal Property
Home improvements often go hand in hand with purchasing new furniture, electronics, appliances, or tools.
If you’ve recently invested in:
- High-end appliances
- Home theater equipment
- Furniture
- Exercise equipment
- Collectibles
- Expensive tools
…it may be worth reviewing whether your personal property limits are still appropriate.
Renovations Can Change Your Liability Risks
Not every renovation affects only the building itself.
Certain improvements may increase your personal liability exposure.
Examples include:
- Installing a swimming pool
- Adding a trampoline
- Building a large deck for entertaining
- Creating outdoor kitchens
- Installing playground equipment
These additions don’t automatically mean your premiums will increase significantly, but they are good reasons to review your liability protection with your insurance professional.
Contractors Need Their Own Insurance
If you’re hiring professionals, verify that they carry appropriate insurance before work begins.
Ask for proof of:
- General liability insurance
- Workers’ compensation insurance (when applicable)
Their insurance helps protect both you and the contractor if something unexpected occurs during construction.
Also, and this is CRITICAL. Make sure that you have a signed contract with your builder stating who is responsible for the materials as well as the finished product while it’s under construction. Are they insuring the project, or are you expected to?
Before the Project Starts
One of the best times to contact your insurance agency is before construction begins.
A quick conversation can help identify whether:
- Your current coverage is adequate.
- A renovation may require policy updates.
- Temporary risks during construction should be considered.
- Newly built structures will need to be added to your policy once completed.
Planning ahead is often much easier than trying to make changes after a loss occurs.
Keep Good Records
As your project progresses, save:
- Contracts
- Receipts
- Photos before and after construction
- Permits (when applicable)
- Lists of major upgrades
These records can be helpful when updating your policy and documenting improvements.
Replacement Cost vs. Market Value
One common misconception is that insurance should match what you paid for your home.
In reality, homeowners insurance is generally designed around the estimated cost to rebuild your home—not its real estate market value.
A renovation that increases rebuilding costs may require adjustments to your policy, even if local housing prices remain unchanged.
A Simple Insurance Review Can Make a Big Difference
Whether you’re remodeling a cottage near Lake Leelanau, adding a garage in Kingsley, finishing a basement in Traverse City, or building a new pole barn outside Elk Rapids, it’s a good idea to review your insurance after major improvements.
An annual policy review can help ensure your coverage keeps pace with changes to your home and your lifestyle.
If you’re planning a renovation—or you’ve recently completed one—Cardinal Insurance Group can help you review your current homeowners policy and discuss whether any updates may be appropriate for your situation.
Contact Cardinal Insurance Group today to schedule a personalized insurance review before your next home improvement project is complete.
Linda M. Fisher, AAI, CIC, CPRIA, CPRM, LIC, LUTCF, TQA
Trusted Guidance. Personalized Service.