That upcoming renovation is more than just an upgrade—it's a smart move to increase your rental income and long-term property value. You've planned the budget, hired the contractor, and picked out the finishes, but have you made the single most important phone call to protect it all?
Many landlords don't realize that a major renovation can silently alter the terms of their insurance policy, potentially leaving them exposed. Before you swing the first hammer, let's make sure your investment is truly protected and not one mishap away from a financially devastating denied claim.
How Renovations Can Affect Your Landlord Insurance Policy
How a renovation affects your landlord insurance policy coverage depends entirely on its scale. The impact of a minor cosmetic update is vastly different from that of a major structural overhaul.
On Minor Renovations
Minor, cosmetic projects typically have no direct effect on your insurance policy.
Because things like painting a room, replacing a light fixture, or refinishing floors don't significantly increase your property's replacement cost or risk, your existing coverage remains adequate. You generally do not need to notify your insurer about these small updates.
On Major Renovations
Major renovations have a significant and immediate effect on your policy because they fundamentally change the property your insurer has agreed to cover. You must contact your insurer before work begins, and you can expect several changes:
- Increased Rental Dwelling Policy Coverage: Your property's rebuild value will go up after a major remodel. Your coverage limit must be raised to match this new value and keep you fully protected from a total loss.
- Higher Premiums: With increased property value and new potential risks, your premium will likely increase to reflect the higher level of coverage.
- New Liability Requirements: Adding features like a swimming pool or a large deck increases the risk of injury on your property. Your insurer will likely require you to raise your tenant injury liability coverage limits.
- Temporary Policy Changes: For the duration of the project, your insurer may issue a vacancy permit to cover the empty property or even require a separate builder's risk policy to properly insure the construction itself.
6 Renovation Types That Can Affect Your Landlord Insurance
Of course. Not all projects are created equal in the eyes of your insurer. You should always let them know before starting renovations that significantly change your property's value, structure, or risk.
Here are the key types of renovations that can affect your landlord insurance policy:
1. Structural Additions and Changes
These are big projects that alter the size or layout of your property. They increase the square footage and the overall cost to rebuild your rental after a total loss.
Examples: Adding a new bedroom, building a deck, or removing a load-bearing wall.
2. Full Kitchen or Bathroom Remodels
A complete overhaul of these rooms adds major value to your property. High-end materials, new plumbing, and expensive appliances significantly increase your property's replacement cost.
Examples: Installing new cabinets, granite countertops, and high-end appliances.
3. Roof Replacement
Your roof is a critical line of defense against damage. A new roof reduces the risk of leaks and water damage, and your insurer will want to know about it. This kind of risk-reducing upgrade could even earn you a discount.
4. Major System Upgrades
This includes replacing the home's core systems. Modernizing the electrical, plumbing, or HVAC (heating and cooling) systems changes the risk profile of your property and must be reported.
5. Adding a Pool or Hot Tub
These features are often called "attractive nuisances" in the insurance world. They significantly increase the risk of someone getting injured on your property, which directly impacts your liability coverage.
6. Finishing a Basement or Attic
Converting an unfinished space into a livable area adds valuable square footage. This increases the cost to rebuild the property and changes how that part of the home is used.
A good rule of thumb: If your project requires a building permit, you should definitely call your insurance agent.
Case Study: Two Landlords, Two Renovations
Meet Alex and Ben. They both own similar single-family rental homes in the same neighborhood. After their long-term tenants moved out around the same time, they both decided it was the perfect opportunity to do some upgrades before listing their properties again.
Scenario 1: Alex’s Minor Renovation
The Project: Alex decided on a quick, cosmetic refresh to make the property feel modern and clean. Over two weeks, the work included:
- Painting the entire interior.
- Replacing old, dated light fixtures and ceiling fans.
- Swapping out the bathroom vanity and faucet.
- Refinishing the existing hardwood floors.
The Insurance Action & Outcome: Alex's project was purely cosmetic. It didn't change the structure of the home, add significant value (in terms of rebuild cost), or introduce new risks. The property was only vacant for 15 days, well within the limits of his policy's vacancy clause.
Because the renovation was minor, Alex did not need to contact his insurance provider. His existing coverage was still perfectly adequate, and his policy and premium remained unchanged. He successfully completed his project and welcomed a new tenant without any insurance-related steps.
Scenario 2: Ben’s Major Renovation
The Project: Ben wanted to make a more significant investment to increase the property's rental value and appeal. His project was a major overhaul planned to take three months:
- A complete kitchen gut and remodel with new appliances, cabinets, and granite countertops.
- Removing a non-load-bearing wall to create an open-concept living space.
- Adding a 200-square-foot wooden deck in the backyard.
The Insurance Action & Outcome: Ben recognized that his project was major. It would add significant value (over $50,000), alter the property's layout, create a new outdoor structure (the deck), and require the home to be vacant for about 90 days.
Before any work began, Ben called his insurance agent. Here’s what happened:
- During Construction: Because the property would be empty for 90 days, his agent issued a temporary vacancy permit. This endorsement ensured his policy would not be voided by the standard vacancy clause, keeping it protected against risks like fire or storm damage during the renovation.
- After Completion: Once the work was done, Ben informed his agent. The policy was then permanently updated to reflect the changes:
- His dwelling coverage was increased by $50,000 to cover the new, higher cost to rebuild the home.
- His liability coverage was increased because the new deck presented a higher risk of guest injuries.
- His annual premium went up slightly to reflect the increased coverage amounts.
Conclusion: The Key Difference
This case study shows that the need to update your insurance depends entirely on the scale of your project.
Alex's minor refresh didn't change his property's risk or fundamental value, so no action was needed.
Ben's major remodel created more value and new risks. By proactively communicating with his insurer, he ensured he was never without coverage. If Ben had skipped that call and a fire had occurred two months into the project, his claim likely would have been denied due to the extended vacancy, leaving him with a devastating financial loss.
Are Temporary Vacancies During Renovations Covered by Landlord Insurance?
Most landlord insurance includes a "vacancy clause" that limits or reduces coverage if the property is unoccupied for a set period, typically 30 to 60 consecutive days. An empty property is at a higher risk for issues like theft, vandalism, or major water damage that goes undiscovered. After this time limit passes, your standard coverage may no longer fully apply.
If your renovation takes longer than this window and you haven't notified your insurer, a future claim could be drastically reduced or even denied. To stay protected, you must contact your insurance provider before the renovation begins. They can often add a vacancy permit or an endorsement to your existing policy. For larger projects, they may require a more specialized builder's risk policy to properly cover the property and materials during construction.
Risks That Are Not Covered While Renovations Are Ongoing
Here are the most common risks that are not covered by a standard landlord policy during a renovation:
Faulty Workmanship
Your insurance covers sudden and accidental damage, not poor-quality work. If a contractor's mistake leads to a problem, like a leaky pipe from a bad connection, your policy won't pay to fix the mistake itself. Correcting bad work is the contractor's financial responsibility.
Injuries to Contractors or Their Employees
Your liability coverage protects you from claims by guests or tenants, not the paid professionals you hire. Your contractor must carry their own general liability and workers' compensation insurance to cover their team if someone gets hurt on the job.
Theft of the Contractor's Tools and Equipment
Your policy protects your property, not the contractor's. The contractor is responsible for insuring their own tools, vehicles, and equipment against theft or damage while at your property.
Damage Due to Extended Vacancy
If the property is vacant longer than your policy allows (often 30-60 days) and you haven't secured a special vacancy permit, coverage for certain perils is often excluded. This typically includes vandalism, malicious mischief, glass breakage, and water damage from burst pipes.
Theft of Uninstalled Materials
Standard policies may not cover building supplies (like lumber, fixtures, or appliances) that have been delivered to the site but are not yet permanently installed. A specialized builder's risk policy is specifically designed to cover these materials.
Upgrade Your Coverage as Easily as You Upgrade Your Property
Your renovation is the big project—your insurance shouldn't be. Stop wasting time with old-school policies that don’t keep up with your investments. Obie simplifies landlord insurance, offering transparent coverage tailored for property investors like you. You can get an instant quote online in just a few minutes to ensure your property and your new upgrades are fully protected. Don't start your next project without the right coverage.
Secure your investment the easy way. Get your free quote from Obie today.
FAQs about the Impact of Renovations to Your Landlord Insurance Policy
Do I have to tell my insurer about every renovation?
No, only major ones. If a project adds significant value, changes the structure (like adding a deck), or requires a permit, you must tell them. Simple cosmetic updates like painting are fine.
When is the best time to contact my insurance agent?
Contact them before you start any work. This ensures you have the right coverage, like a vacancy permit, in place from day one of the project so there are no gaps in your protection.
Will my insurance premium always increase after a renovation?
Not always. While a higher property value often means a higher premium, risk-reducing upgrades like a new roof or updated electrical systems can actually earn you a discount.
What if I forgot to tell my insurer about a past renovation?
Call them immediately. Your property is likely underinsured, meaning you wouldn't have enough coverage to rebuild it after a disaster. It's crucial to update your policy to reflect its new, higher value.
Isn't my contractor's insurance enough to cover the project?
No. Their policy covers their mistakes and their workers' injuries. Your policy covers the property itself from disasters like fire or storms. You absolutely need both for full protection.
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