3 Home Additions That Will Raise Your Insurance Rates

by Emily Guy Birken

One of the joys (and headaches) of home ownership is embarking on the remodeling projects that will turn your house into your dream home. While no one expects an addition or a remodel to their house to be cheap (even if you do plan to do most of the labor yourself), there is one expense that many homeowners overlook when planning their new additions: insurance premiums. The following are three home additions that can continue to cost you long after the sawdust has cleared:

Swimming pool insurance rates

A swimming pool could increase your insurance rates

1. A swimming pool. We all dream of relaxing by the pool in the backyard. And in many areas of the country, the addition of a swimming pool can really raise your property value. However, once your pool is installed and ready for laps, you’ll also find yourself sending heftier checks to your insurance company.

This mostly stems from the increased potential liability you face by owning a pool. You will likely see a rise in your premium that reflects your increased liability needs. It’s also important to note that while your basic home insurance policy does cover injury and damages, the limits on that coverage will often not be enough for homeowners with pools. Many homeowners will need to also purchase umbrella insurance in order to be fully covered.

2. A finished basement. Making your basement into a rec room or home theater is a very popular way of increasing the usable square footage of your home. But increasing your home’s finished footprint will also raise your insurance premium. That’s because finished and unfinished portions of the home are covered at different rates, which makes sense when think about the difference between what you find in a living room and what you find in an attic.

On top of that issue is the question of flooding. Very few homeowners policies cover flooding, although some will take care of damage that resulted from a broken pipe but not other types of flooding. You may need to buy or beef up your flood insurance policy to make certain your finished basement is completely covered.

3. An additional room. You may have always dreamed of adding another bedroom or a sunroom to your home. You know that it will be expensive to add on an entirely new room (or extend an existing one), but don’t forget the additional costs after you’ve finished construction.

The added square footage of your home will add to the value of your home, meaning that you will have to pay more in homeowners insurance. In addition, don’t forget that additional space in your home also means additional furniture, artwork, electronics, appliances, etc, which means that value of your personal property has gone up along with the value of the house. All together, that will mean your insurance will need to go up.

The Bottom Line

Before beginning any major home improvement project, make sure you sit down with a calculator and determine not only the construction costs, but also the maintenance and insurance costs (this is also a good time to shop around for homeowners insurance rates). You would hate to finish your dream home and then find that you can’t afford it.

Photo Credit: Yatmandu.

Published or updated January 21, 2013.
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{ 1 comment… read it below or add one }

1 Snarkfinance

Great tips. I think a lot of people don’t factor in the carrying costs of their financial decisions/acquisition of things. Unfortunately a lot of people are barely getting by when they decide to “spring” for that new addition, etc… and then are slammed to find out their insurance rates have increased.


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