5 Major Home Additions that Will Significantly Increase Your Insurance Premium

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By: myersntracy
on 5th Oct,2012

Personal property value also affects your premium, because the more stuff you own, the higher your rate.
5 Major Home Additions that Will Significantly Increase Your Insurance Premium

If you have the extra money to spend, a home improvement project is one of the best ways to increase the value of your property and create the home of your dreams. Remodeling projects vary in size and cost, but even the smallest improvement can make a huge impact on both your personal satisfaction and the satisfaction of potential buyers (if you're thinking about putting your house up for sale).

However, if the project you have in mind is large and costly, there are at least two other important points you must consider before moving forward; how will this addition affect my home insurance premium, and can I afford it?

There are two major factors that determine the cost of your home insurance; home value and personal property value. Whenever you remodel a significant portion of your home (whether outdoors or indoors), a real estate appraiser will determine how much the project has increased your home's value, and your insurance company will change your premium to reflect that new value. Personal property value also affects your premium, because the more stuff you own, the higher your rate. Anytime you make a new major purchase, you should notify your insurance company, so that they can change the personal property value in your policy. This is important because if you were to lose your property to a fire or other disaster, you need to make sure your home insurance can cover the cost of replacing these items.

Below are five of the largest home additions that will make a significant change to your home insurance premium.


Hot tub: Hot tubs are relaxing and fun. They are also expensive. Prices range from $3,000 to $30,000, depending on the make and model. In addition to the base price of a hot tub, owners must also purchase the necessary accessories and chemicals for proper upkeep. They can also expensive to repair and use a lot of energy to stay heated all year long. As far as insurance is concerned, a hot tub can be viewed as a potential hazard, which will automatically increase your premium. The added value to your home depends on the hot tub you purchase, but the more expensive the hot tub, the higher the increase.



Professional landscaping with a deck or patio: These additions are great for a home's value and selling potential. Depending on the size of the space and the materials and plants used, an upgraded outdoor space can cost you anywhere from a couple thousand to thousands of dollars. This is definitely a project you will need to save for, and the upkeep costs are not cheap either; unless you are a professional landscaper or gardener and can take care of the lawn yourself. Because this project can significantly increase the value of your home, your home insurance premium should be expected to rise, as well.



Home appliance upgrades: Every homeowner has their own vision of a “dream kitchen,” and some save for years for this remodeling project. If you are looking to purchase a new, high-end appliance package, make sure to consider the additional costs associated with such a purchase. Some high-end appliance packages can cost you up to $20,000, which is great for added home value, but with the increase in your insurance premium and higher repair costs, the project may not be worth the dream.



Pool: A pool in the back yard is every family's dream, but can also be an insurance and home-selling nightmare. Although it will add value to your home, pools are costly to build and maintain. Insurance companies see them as a potential hazard, so this, coupled with the increase in home value, will drive up your home insurance premium considerably. On a side note, if you are thinking about selling your home in the future, a pool can sometimes be a turn off to buyers who view back yard pools as dangerous and too much upkeep.



Construction of a new space: Thinking about extending your master bedroom or adding on a game room or office? As with any home project, the costs associated with new construction will always exceed the base amount. Anytime you add extra space to your home, you are also adding the need to purchase new furniture, decorating accessories, electronics, appliances, etc. You may even notice an increase in your home energy costs. All of this means that you will not only be increasing the value of your home but your personal property value, as well. Be sure you can handle all these costs before drawing up your plans.

As you can see, major home improvement projects come with a hefty price. It's not just an increase in home insurance payments that you'll need to worry about, there are many hidden costs that you'll need to parse out before knowing if you can truly afford the addition. Otherwise, debt may be knocking on your door sooner than later.


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