Home renovations change what your insurance policy needs to cover. Any project that raises your home's replacement cost, adds new risk, or improves safety will affect your premiums, your coverage limits, or both. Whether you are finishing a basement, replacing a roof, or adding a pool, your insurer needs to know. In this article, we walk through exactly how different renovations impact your home insurance policy, which upgrades can lower your rates, and the steps you need to take before, during, and after construction to stay fully protected.
How Do Home Renovations Affect Your Homeowners Insurance Policy?
Home renovations affect your homeowners insurance policy by changing the cost to rebuild your home if it is damaged or destroyed. When you upgrade a kitchen, add square footage, or install premium materials, the replacement value of your home goes up. If your policy does not reflect that new value, you could be underinsured after a major loss.
According to the Joint Center for Housing Studies at Harvard University, annual spending on homeowner improvements and maintenance reached $466 billion through mid-2025. The 2025 U.S. Houzz and Home Study found that 54 percent of American homeowners completed a renovation project in 2024, with a median spend of $20,000. That is a lot of money flowing into homes across the country, and every dollar of it can change what your insurance policy needs to cover.
AAA Club Alliance explains it simply: if your home was insured for $200,000 before renovations but would now cost $250,000 to rebuild, your old policy may leave you underinsured after a major loss. Updating your policy after a renovation closes that gap and keeps your coverage matched to your home's current value.
The Insurance Information Institute recommends contacting your insurance agent or broker before any renovation begins. Not after. Not during. Before. This gives your insurer time to review your coverage, recommend adjustments, and help you avoid gaps that could lead to denied claims later.
Do I Need to Tell My Insurance Company About Home Renovations?
Yes, you need to tell your insurance company about home renovations, especially any project that changes your home's value or risk profile. Small cosmetic changes like painting walls or swapping light fixtures usually do not require a call. But anything structural, anything that adds square footage, and anything that introduces new risk features like a pool or deck should be reported.
According to Bankrate, if you do not inform your insurer about renovations and you file a claim later, the claim might get denied because the improvements were not covered under your existing policy. In some cases, unreported renovations could even void parts of your coverage entirely.
Insurance expert Nick Ramirez of Goosehead Insurance told Yahoo Finance that structural projects, work that adds major value to the home, or renovations costing $50,000 or more are all worthy of a call to your insurance company. When you reach out, be ready to share the project scope, timeline, cost estimates, building permits, and contractor agreements.
We always recommend getting in touch with your agent before construction starts. A quick conversation with your home insurance provider is the single most important step most homeowners skip, and it can make the difference between a smooth claims process and a costly surprise.
Which Home Renovations Increase Insurance Premiums?
Home renovations that increase insurance premiums are typically projects that raise the replacement cost of your home or introduce new liability risks. The more expensive it would be to rebuild your home after the renovation, the more your dwelling coverage needs to increase, and that means higher premiums.
Does Adding a Pool Increase Home Insurance?
Yes, adding a pool increases home insurance because pools raise your liability exposure. According to Mercury Insurance, homeowners with pools are at greater risk for accidents and injuries, which can result in costly medical bills or lawsuits. Your insurer may require you to increase your liability limits, add an umbrella policy, or both. Some carriers also require safety features like fencing, self-closing gates, and pool alarms before they will insure the property.
Does a Kitchen Remodel Affect Home Insurance?
Yes, a kitchen remodel affects home insurance because it changes the replacement cost of one of the most valuable rooms in your home. According to the 2024 Cost vs. Value Report by Remodeling Magazine, even a minor kitchen remodel returns 96 percent of its cost at resale. The 2025 Houzz study found that the median spend on major remodels of small kitchens rose 9 percent year over year to $35,000 in 2024. High-end countertops, custom cabinetry, and new appliances all add to the cost an insurer would need to pay to restore your kitchen after a covered loss.
Does Adding Square Footage Raise Premiums?
Yes, adding square footage raises premiums because more space means more materials and labor to rebuild. Progressive notes that additions and renovations that increase your home's value result in a higher insurance rate to cover the increased cost of repairing or rebuilding. Whether you are adding a bedroom, expanding the living room, or building a sunroom, your dwelling coverage needs to go up.
Hot tubs, decks, detached structures, and home offices can also push premiums higher. If you store expensive equipment in a home office or host clients there, you may even need a business property endorsement on your policy.
Which Home Renovations Can Lower Insurance Premiums?
Home renovations that lower insurance premiums are projects that reduce the risk of damage to your home. Anything that makes your home safer, stronger, or harder to break into can qualify you for discounts with many carriers.
Does a New Roof Lower Home Insurance?
Yes, a new roof can lower home insurance because the age and material of your roof are major factors in your premium. According to Travelers Insurance, replacing your roof with stronger, wind-resistant, or hail-resistant materials may qualify you for a discount. A newer roof reduces the chance of leaks, storm damage, and costly water claims, which is exactly what insurers want to see.
The client's own home insurance page at UR Choice Insurance confirms that the age of the roof plays a large role in the price of insurance, and that carriers reward homeowners with newer roofs by charging less. If your roof is more than 15 to 20 years old, replacing it is one of the smartest moves you can make for both your home and your wallet.
Do Electrical and Plumbing Upgrades Affect Premiums?
Yes, electrical and plumbing upgrades can affect premiums in a positive way. Old knob-and-tube wiring is a fire hazard, and outdated plumbing can lead to water damage claims. Modernizing these systems reduces risk, and many insurers reward you with lower rates. According to the Insurance Information Institute, upgrading your heating, plumbing, or electrical systems may earn you a reduction in premium because it lowers the risk of fire and water damage.
Does Installing a Security System Lower Insurance?
Yes, installing a security system lowers insurance for many homeowners. The Insurance Information Institute states that you may qualify for a discount of at least 5 percent for installing stronger doors, smoke detectors, a burglar alarm, or dead-bolt locks. Some carriers cut premiums by as much as 15 to 20 percent if you install a monitored fire and burglar alarm that connects to a remote monitoring station.
Here in Madison, Alabama, many of our carrier partners offer these types of safety discounts. We can help you identify which upgrades qualify so you get every dollar of savings you deserve.
How Renovation Costs Compare to Insurance Impact
The table below shows common renovation types, their average costs, and how they typically affect your home insurance policy. This gives you a clear picture of what to expect before you start any project.
Renovation TypeAverage CostInsurance ImpactMinor Kitchen Remodel$27,492Increases dwelling coverage need; premiums may riseMajor Kitchen Remodel$85,000+Significant increase in replacement cost and premiumsBathroom Remodel (primary, small)$17,000Moderate increase in dwelling coverage needRoof Replacement$10,000 to $30,000May lower premiums; discount for impact-resistant materialsElectrical System Upgrade$8,000 to $15,000May lower premiums; reduces fire riskSecurity System Installation$500 to $2,0005% to 20% premium discount at many carriersSwimming Pool$35,000 to $65,000Increases liability exposure; premiums rise; may need umbrella policyFinished Basement$20,000 to $50,000Increases replacement cost; may need sewer backup coverageGarage Door Replacement$4,672Minimal insurance impact; 268% ROI at resale
Sources: 2025 Cost vs. Value Report by Zonda/JLC/Remodeling Magazine, 2025 U.S. Houzz and Home Study, Insurance Information Institute, Bankrate, Travelers Insurance.
Does Homeowners Insurance Cover Renovations During Construction?
Homeowners insurance may cover renovations during construction, but the level of protection depends on the size and scope of the project. For smaller cosmetic updates like painting, replacing flooring, or upgrading fixtures, your standard policy typically provides enough protection. For larger structural projects, you may need additional coverage.
According to AAA Club Alliance, a standard homeowners policy is designed to protect a stable, finished structure, not one undergoing significant changes. When your home becomes a construction site, the risk of fire increases from exposed wiring, theft of materials goes up, and you may trigger vacancy clauses if you move out during the work.
It is also worth noting that standard homeowners policies do not cover flood damage, whether during renovation or after. If your project involves any below-grade work or you live in a flood-prone area, ask about separate flood insurance. Some carriers set this limit at just 30 days. If a pipe bursts on day 61 while you are living in a temporary rental, your entire claim could be denied.
What Is Builder's Risk Insurance?
Builder's risk insurance is a specialized policy that covers property and materials during construction or renovation projects. It protects against fire, theft, vandalism, storm damage, and other events that could disrupt the build. According to Policygenius, builder's risk insurance is available as a stand-alone policy or sometimes as an add-on endorsement to your existing homeowners policy.
The cost of builder's risk insurance generally runs 1 to 5 percent of the construction budget, according to Distinguished Insurance. Policy terms typically run 6 to 12 months depending on the project. If you are planning a major renovation, this coverage fills the critical gaps that your standard homeowners policy leaves open.
What Is a Dwelling Under Construction Endorsement?
A dwelling under construction endorsement is a coverage add-on for shorter renovation projects that are not expected to last more than a month or two. It extends your existing homeowners coverage while work is underway. It protects both the existing structure and building materials if they are damaged by fire, water, or other covered events. For longer or more complex projects, builder's risk insurance is the better option.
How Much Does Home Insurance Go Up After Renovation?
How much home insurance goes up after renovation depends on how much the renovation adds to your home's replacement cost. There is no single percentage that applies to every project because every home and every renovation is different. However, the general rule is that your premium increases in proportion to the increase in your dwelling coverage limit.
For example, if your dwelling coverage goes from $250,000 to $300,000 after adding a room, your premium will reflect that 20 percent increase in coverage. The exact dollar amount depends on your carrier, your location, and your overall risk profile.
According to the Insurance Group of America, significant renovations may require an increase in your dwelling coverage to reflect your home's new replacement cost, and failing to update your policy could leave you underinsured or ineligible for certain claims. The key is to request a reassessment from your insurer after the project is complete so your limits match your home's actual current value.
On the flip side, safety upgrades can offset some of the increase. If you replace the roof, update the electrical system, and install a monitored alarm as part of a larger renovation, the discounts from those improvements can help balance out the higher dwelling coverage costs.
What Happens If You Do Not Update Your Policy After Renovating?
If you do not update your policy after renovating, you risk being underinsured, having claims denied, or even having your policy cancelled. The consequences are real and can be financially devastating.
Gregg Barrett, CEO of insurance technology provider WaterStreet Company, told Yahoo Finance that insurers can deny claims if you change your home's risk profile without telling them. A major remodel could easily affect that risk profile, and an insurer that discovers unreported renovations after a claim has every right to limit or deny the payout.
Consider this scenario from AAA: you finish your basement and later experience water damage. If your policy was never updated, your provider could say that space was not part of the covered home. The claim gets denied, and you are stuck paying for the repairs out of pocket.
The vacancy clause is another trap. If you move out during construction for more than 30 to 60 days without notifying your insurer, certain coverage protections can be suspended automatically. This is not something your insurer does out of spite. It is built into the policy language, and it applies whether you knew about it or not.
How to Update Your Home Insurance After Renovations
Updating your home insurance after renovations is a straightforward process when you follow the right steps. Start by contacting your agent as soon as the project is complete. Provide documentation including receipts for materials and labor, contractor contracts, before and after photos, and any permits or inspection reports.
Your insurer will use this information to reassess your home's replacement cost and adjust your coverage limits accordingly. Specifically, you should discuss adjusting your dwelling coverage to match the new rebuild cost, updating your personal property coverage if you purchased new appliances or furnishings, increasing your liability limits if you added risk features like a pool or hot tub, and asking about discounts for any safety or efficiency improvements you made.
The Insurance Information Institute also recommends taking photographs before, during, and after the renovation so you have a visual record of all work done. Keep copies of everything. If you purchased new belongings as part of the remodel, add them to your home inventory right away.
Renovations That May Require Additional Liability Coverage
Certain renovations introduce new liability risks that your standard policy may not fully cover. Pools, hot tubs, trampolines, large decks, and fire pits all increase the chances of someone getting injured on your property. If a guest slips on your new pool deck and breaks an arm, your liability coverage is what pays for their medical bills and protects you from a lawsuit.
According to Idaho Farm Bureau Insurance, these changes may require you to adjust your liability coverage to adequately protect you in case of an accident or injury on your property. The standard liability limit on many homeowners policies is $100,000, but that may not be enough if you have added high-risk features.
We often recommend increasing liability limits to $300,000 or $500,000, and many of our clients add an umbrella policy for an extra layer of protection. Umbrella policies are surprisingly affordable and can cover liability claims that exceed your homeowners policy limits.
How Bundling Can Help Offset Higher Premiums After Renovation
If your premiums go up after a renovation, bundling your policies is one of the most effective ways to offset the increase. Combining your home and auto insurance with the same carrier can save you up to 20 percent or more depending on the company.
Multi-policy discounts, claims-free history discounts, and safety feature discounts can all stack together to keep your total insurance costs manageable even after a major renovation. The Insurance Group of America recommends shopping around after renovations if your premiums increase significantly, comparing quotes from other insurers to find competitive rates.
That is exactly what we do. We compare quotes from over 20 top-rated carriers so you can see who offers the best combination of coverage and price for your newly renovated home. Choosing the right insurer after a renovation is just as important as choosing the right contractor.
The ROI Connection Between Renovations and Insurance
Return on investment matters for both resale value and insurance costs. The 2025 Cost vs. Value Report from Zonda, JLC, and Remodeling Magazine found that garage door replacement offers the highest ROI at 268 percent, followed by steel entry door replacement at 216 percent and manufactured stone veneer at 208 percent. These exterior projects boost your home's value with minimal insurance impact because they do not significantly change the interior replacement cost.
Interior projects tell a different story. A minor kitchen remodel returns 113 percent ROI according to the 2025 report, but it also raises your dwelling coverage needs. A major kitchen remodel costing $85,000 or more only returns about 38 to 50 percent ROI and significantly increases your insurance costs. The 2024 Houzz study found that 39 percent of homeowners exceeded their renovation budget, which makes it even more important to factor insurance changes into your planning from the start.
The smart play is to choose renovations that give you both a strong resale return and a manageable insurance impact. Safety upgrades like a new roof, updated wiring, and a security system actually improve both sides of the equation by boosting home value while lowering premiums.
Frequently Asked Questions
Does Home Insurance Cover Damage During Renovations?
Home insurance covers damage during renovations in some cases, but it depends on the scope of the project. Standard policies typically cover smaller cosmetic updates. For larger structural work, you may need a dwelling under construction endorsement or a separate builder's risk policy. Always check with your insurer before work begins to confirm what is and is not covered.
How Long After a Renovation Should I Update My Policy?
You should update your policy as soon as the renovation is complete. Do not wait for your annual policy review. The sooner you notify your insurer, the sooner your new improvements are protected. Ideally, you should contact your agent before the project starts, again during construction if the scope changes, and once more when the work is done.
Can a Renovation Get My Home Insurance Cancelled?
Yes, a renovation can get your home insurance cancelled if it introduces risks your carrier is not willing to cover. For example, some insurers will not insure homes with certain types of pools, older electrical systems, or properties that sit vacant for extended periods during construction. Communicating with your insurer early helps you avoid cancellation and find alternative coverage if needed.
What Is Replacement Cost vs. Market Value?
Replacement cost is the amount it would take to rebuild your home from the ground up using similar materials and quality. Market value is what your home would sell for on the open market, which includes the land value. Insurance policies are based on replacement cost, not market value. After a renovation, your replacement cost goes up even if the housing market stays flat.
Do I Need to Increase Coverage if I Finish My Basement?
Yes, you need to increase coverage if you finish your basement because you are turning unfinished space into livable square footage. This increases both your dwelling coverage needs and your personal property coverage if you add furniture, electronics, or other belongings. Travelers Insurance also recommends considering sewer backup coverage for finished basements, since most standard policies do not cover sewer-related damage. You should also ask about mold coverage, which is another common concern in below-grade living spaces.
Does a Deck Addition Affect Home Insurance?
Yes, a deck addition affects home insurance because it changes your property's footprint and can increase both replacement cost and liability exposure. A ground-level deck has less impact than a second-story deck, which carries a higher injury risk. According to personal liability coverage guidelines, you should let your agent know about any new outdoor structure so your policy can be adjusted.
What Home Improvements Give You the Best Insurance Discounts?
The home improvements that give you the best insurance discounts are a new roof, updated electrical wiring, modern plumbing, a monitored security system, storm shutters, impact-resistant windows, and fire-resistant building materials. According to the Insurance Information Institute, these upgrades reduce the risk of costly claims, and many carriers reward them with premium reductions of 5 to 20 percent.
The Takeaway
Every home renovation changes what your insurance policy needs to cover. Projects that raise your home's replacement cost will increase premiums. Projects that improve safety and reduce risk can lower them. The most important step you can take is to call your agent before construction starts, stay in communication during the project, and update your policy as soon as the work is done.
If you are planning a renovation or have recently completed one, reach out to us at UR Choice Insurance. We compare quotes from over 20 top-rated carriers to help you find the right coverage at the best price for your updated home. Call or text us at (256) 692-5562 to get started.