HOME IMPROVEMENT : More Insurance May Be One More Thing to Add On During Remodeling Project

So you’ve hired a contractor, picked out paint and carpet, and set the date for your remodeling work to begin. Remodeling Ideas magazine suggests adding one more item to your “to do” list: Give your insurance agent a call to make sure your homeowner’s policy will keep up with your remodeling improvements.

“Contact your agent when you begin to do anything to your home that’s going to add value,” advises Bill Anderson, a certified property and casualty underwriter and vice president of education for the Independent Insurance Agents of America. By checking your needs before the work begins, you can be sure your project will be insured during construction, as well as after.

Here are some questions to ask your insurance professional, along with a discussion of coverage under a typical homeowner’s policy. Check the specifics of your own policy with your agent or insurance company:

Q. Do I need to increase my coverage?

A. If you’re making major improvements, the answer to that question is probably “yes.” Typical homeowner’s insurance is based on the cost of replacing your home if it’s destroyed. When you add space, upgrade to luxury finishes, or convert an unfinished area to living space, you make your home more costly to rebuild. As a result, you need to increase the value of your policy.

On the other hand, you may not require increased coverage for changes that are basically cosmetic--freshening up the kitchen with new countertops, flooring, and appliances, for example. To the insurance company, the cost of replacing laminate countertops is the same whether they are brand new or a holdover from the 1950s.

“If there’s any question, contact your agent,” Anderson says. “It’s important that the agent have the opportunity to say either, ‘We don’t have to worry about that,’ or, ‘We do.’ ” You want to be certain that your home remains insured for at least 80% of its replacement value, including the value of the improvements. Below that threshold, most policies will not reimburse you for the full replacement cost of your home should it be damaged or destroyed.

Q. I’m planning a major renovation that will take months to complete. Do I have to pay for increased coverage from the first day of construction?

A. Ask your agent if you can buy what’s called an “endorsement for a dwelling under construction.” This type of policy increases the value of your homeowner’s policy from the start of construction, but gives you a credit for a portion of the premium once the work is complete.

Q. I’m going to have a lot of building materials stacked out in my yard. Are they covered?

A. With a typical policy, materials intended for use in your remodeling and stored on your property are covered for the same perils as the rest of your home. Again, check with your agent to be sure.

Q. Am I covered for the special extras I’m putting in my home?

A. Maybe you’ve commissioned a stained-glass window for the master bath or purchased an antique English brass chandelier for the breakfast room. To protect your investment, purchase separate insurance for such out-of-the-ordinary materials.

The advantage of insuring such items individually is that you, not the insurance company, specify their value. “If they are lost or damaged, the policy says exactly what they are worth, and that’s what you are paid,” says Anderson. “If you leave them under the homeowner’s policy, you are at the mercy of the people adjusting the insurance claim.”

The value of antiques and fine arts is especially subject to dispute.

Q. I’m moving out during construction. Does my coverage stay put?

A. A typical homeowner’s policy doesn’t cover theft from an unoccupied building, so check with your agent if you plan to be away during construction. A few days’ stay in a hotel shouldn’t affect your coverage, but an extended stay might. Be prepared for the worst case.

In addition to protecting your improvements, you also need to insure yourself against another type of risk--the damage to people or property as a result of your remodeling.

If a worker rams the backhoe into your neighbor’s car, or your beagle nips the carpenter, who will pay for the consequences? To make sure it doesn’t come out of your wallet, you need to take two actions:

* Hire only an insured contractor. Ask to see your contractor’s certificate of insurance. This certificate will verify that the contractor carries liability insurance and, where applicable, workers’ compensation insurance.

* Get a written contract for every job. Under certain circumstances, you could be liable for injury to workers not covered by workers’ compensation. Your personal liability insurance may not cover such claims unless you have a written contract for the work being performed on your home.