Remodeling can render old insurance policies insufficient

Not every home is turnkey. When homeowners purchase residential properties, they do so with a general sense of the work and remodeling that needs to be done to make a house a home. For some homeowners, home renovation happens decades down the road to spruce up outdoor space, gut a dated kitchen or convert empty nest bedrooms into a workout space or study. Regardless of what prompts a remodel, data shows that making home improvements increases the value of your home and makes it more appealing to potential buyers, should you ever decide to sell. 

However, increasing your asking price is not the only consequence of giving your home a facelift. By investing time and money into your property, you might find that the appraisal value of your homeowner's insurance policy is as dated as the old kitchen you've spent tens of thousands of dollars to update. It stands to reason, then, that when you make significant renovations to your residential property, it's worth figuring out whether your homeowner's insurance is big enough to cover the added value. 

Failing to update a homeowner's policy can cause major costs to spring up when claims are filed.

"To get the most out of your insurance policy though, it's important to choose coverage limits that accurately reflect the current characteristics of your home, and the true cost to reconstruct it," writes Farmers Insurance on the blog. 

If property owners have made significant investments in remodeling, the cost of restoring your home to its current condition will be greater than it was when you moved in. Your old insurance policy might not allow full restoration if you don't revise it with home improvements.