May is National Home Improvement Month, which means that many homeowners may be gearing up to start ambitious remodeling projects in the near future. Consequently, insurance carriers need to be prepared to accurately account for how any additions or upgrades will affect the cost of replacing insured residential properties.
The National Association of the Remodeling Industry (NARI) is urging those interested in completing a large-scale project this year to get started soon. Creating a plan and lining up a contractor can take months and there may be complications that delay construction or require changes to the plan. Discussing multiple options at the outset of a project can help ensure that the plan runs smoothly, but unexpected obstacles can emerge, particularly with older houses.
One common addition to residential properties is the "mother-in-law suite." Although sometimes built as a detached guesthouse, these dwellings are often built as additions to existing structures. They typically have their own entrance and a bedroom, bathroom and kitchen. Some also contain a separate living room.
Insurers need to consider multiple factors when determining how an addition or home improvement project will impact the structure's valuation, including:
- How much additional square footage has been added to the living area?
- Has the addition changed the shape of the home's living area?
- Did the construction affect the overall quality level of the property?
- Have new plumbing features or other amenities been added to the home?
Insurers need valuation software that can help them quickly update values and identify specific properties that may require additional attention. By targeting specific properties for physical inspections, insurers can keep renewal costs low and maximize their investment dollars, while capturing premium gains by using the valuator and ITV analysis to align policies with values.