With more Americans staying put in their homes due to sky-high mortgage rates, many are opting to spend their extra money on upgrades, like a new deck or kitchen, as well as smaller projects.
Nationally, the overall median home renovation cost ranges from $15,000 to $22,000, according to a survey by home renovation website Houzz. It also found that the top 10% of high-end projects frequently exceed $130,000 to $180,000.
If you are one of the thousands of people who spent money on home renovations recently and you haven’t informed your insurer about it, you should, particularly if those renovations have bolstered the value of your home.
The reason is that if your upgrade increased the cost of rebuilding your home after a claim, your current homeowner’s insurance limits may not be high enough to reimburse you if you have a total loss. Ideally, you should inform your insurer before you start renovations to see if you need to increase your policy limits.
Below, we list the main home renovations that you should inform your insurer about as they can affect your coverage. Remember that prices vary greatly depending on what part of the country you live in.
Kitchen and bathroom upgrades — One of the most surefire ways to increase your home’s value is to remodel and modernize the kitchen or bathroom.
A kitchen upgrade costs between $15,000 and $42,000 for a minor to midrange remodel. You typically recoup 60% to 80% of what you spend in added home value.
Complete kitchen renovations typically have a higher return on investment. The national average for a full kitchen renovation comes in at $65,000, which increases the value of the home by about $40,000.
If you spend $35,000 on your kitchen remodel, including new granite countertops, redwood cabinets and a $5,000 stove, your homeowner’s policy’s current limits may not be adequate to cover the cost of rebuilding the kitchen after a disaster or fire.
Please note: If you upgrade your electrical or plumbing systems during a kitchen or bathroom renovation, you may qualify for an insurance discount. You will need to inform us or your insurer about those changes to qualify for a discount.
Flooring — New or refinished wood flooring also adds value to your home.
According to the National Association of Realtors’ (NAR) Remodeling Impact Report, refinishing hardwood floors yields an impressive 147% return on investment (ROI)—the highest of any interior remodeling project.
The average cost of refinishing hardwood flooring is $3,400, but that spend adds $5,000 to the home’s resale value.
Installing new wood flooring usually has a 91% return on investment. So a $20,000 wood flooring installation can add around $18,000 in value to your home, depending on the flooring type you choose.
Siding — In some parts of the country, repainting your home’s exterior can result in a 112% ROI. Exterior painting is highly influenced by your home’s siding material, the number of stories, and necessary prep work (e.g., pressure washing, scraping). The average cost of painting your home, according to Nerd Wallet, is as follows:
- 1,000 sq. ft. Home: $1,500 – $4,000
- 2,000 sq. ft. Home: $3,000 – $8,000
- 3,000 sq. ft. Home: $4,500 – $10,000+
Adding more square footage — Some people who are tied to their homes if they bought their homes when mortgage rates were hovering less than 3% decide to add more space to their homes to make it more comfortable to telecommute.
While a home expansion does not always add value to your home in the resale market, it will cost more to rebuild in case of a total loss.
You may also need additional insurance if the space you added is not inside your home: like a deck or grandmother’s quarters.
Some final tips
When doing a remodel, make sure that your contractor is licensed, insured and surety bonded before signing the contract.
If the contractor starts but doesn’t finish the job, their surety bond will cover any financial losses the homeowner incurs in getting the job finished.
Also, you need to make sure the contractor has general liability insurance, which covers them for accidental injury to someone other than a worker or themselves (many general contractors are small businesses, operated by their individual owners with a few workers).
You will also want to make sure they have workers’ compensation insurance. If they don’t and one of their workers is injured on the job, they can go to your homeowner’s policy to cover their workers’ comp claim.