True story: An insured homeowner called HUB after they had torn down their house to request the addition of builder's risk coverage to their property. Not only were they not granted it, the personal lines insurer cancelled the client's policy for material change in risk and, as required by law, sent notice to the bank. The bank then began foreclosure proceedings.
What’s the moral? Check with your insurer and bank before beginning major home renovations.
Start by selecting a reliable, professional remodeling contractor. A home improvement contractor with a well-established business can be vetted by reaching out to past customers, or through your local Better Business Bureau. If you solicit bids from several home improvement contractors, be sure they are all bidding on the same scope and quality of work. Discuss variation in bids, and beware of any bid that is substantially lower than the others.
Renovation Contracts Are Critical
A well-written contract is a critical next step in any home remodeling project. The contract is what holds the job together and ensures that all parties involved agree to the same vision and scope for the project.
Among other things, your contract should include:
- What the contractor will - and will not - do
- A detailed list of project materials
- Approximate start and completion dates
- Financial terms, including total price, payment schedule and cancellation penalty, if applicable
- A minimum one-year warranty on materials and workmanship
- A binding arbitration clause in the event of a disagreement
The National Association of the Remodeling Industry (NARI) advises that you also take steps to protect yourself in case workers have an accident while in your home. Ask to see a copy of the contractor's certificate of insurance. Most states require a contractor to carry worker's compensation, property damage and personal liability insurance. Have your HUB broker review the contractor's certificate of insurance to make sure it meets minimum requirements.
If you hire a general contractor, one of their responsibilities should be to ensure that all subcontractors provide a reliable certificate of insurance. Should the construction project extend past the expiration date of the policies, ask for an updated certificate.
Do a Contract Review
As an extra precaution before you sign a contract, ask your broker and an attorney to review it. Most contracts include an insurance provision that outlines your responsibility as well as what is required of your contractor. A legal review will help you avoid any contractual transfer of liability, or performance requirements that do not meet your objectives.
You should also discuss with your broker how the changes you are making will affect the insurance coverage your homeowners insurance. Your broker will review the valuation clause on your policy to determine what your property limit needs to be in order to avoid any coverage gaps.
Once work is complete, your broker can review the contents coverage on your home to determine if it needs to be updated. Did your makeover include any custom built-ins or fixtures that should be added to a schedule of valuable articles? Also, is the property limit on your home still accurate, reflecting your home's increased value? If you installed a feature such as a pool, spa or hot tub, is your liability limit adequate?
Contact your HUB Personal Lines specialist for more information on amending your homeowner’s policy ahead of renovations and reviewing your building contracts.