Bathroom remodeling is expensive. So, you might want to know how to get homeowners insurance to pay for bathroom remodel projects. However, the truth is that it is not designed to directly cover any renovation work. Now, what does this mean, and what are your alternatives?
Does Homeowners Insurance Cover a Bathroom Remodel?
A homeowners insurance does not usually cover the costs of any renovation work, including bathroom remodels. It is primarily designed to protect your finances should any unforeseen event cause damage to your home and property. More specifically, it covers the costs of restoring your home to its pre-damaged state.
However, there may be exceptions where you can get your homeowners insurance to cover the renovation costs. This could be true in cases where the only way to repair the damage to your home caused by a covered event is a bathroom remodel. Here are some examples:
- Extensive water damage from flooding or build up of moisture within the walls.
- Damage of the structure and fixtures caused by a fire.
- Complete destruction of the bathroom due to an earthquake or a tornado.
- Significant damage to the bathroom caused by large pieces of debris, like rocks or a falling branch.
- Contamination from hazardous materials requiring demolition and extensive clean up.
- Plumbing failure within the wall cavity or under the floor, requiring forced access.
- Foundation settlement due to changes in soil moisture level or poorly built foundations, necessitating a rebuild.
Based on these examples, a remodel can only be covered by your homeowners insurance requires an unexpected event to cause significant damage to your bathroom. In other words, the remodel should not be deliberate. It has to be driven by the need to repair or rebuild your home after an unforeseen, destructive event.
On the other hand, a planned bathroom remodel is not covered by your homeowners insurance. Instead, it will possibly increase your home’s rebuild value beyond what your insurance covers. The adjustment may involve the following factors:
- Newer, high-quality materials. Newer building materials tend to have a better quality than what you’ve previously used to build your bathroom. These upgrades may make it more expensive to rebuild your bath.
- Compliance with the building code. A remodel will need to comply with the current building code. The new requirements may require you to make costly changes that will drive the bathroom’s rebuild value up.
- Updates to features and systems. Renovating your bathroom may involve modernizing your fixtures and features like the electronics. The rebuild value increases with the associated costs of the modernization.
- Specialized labor costs. Sometimes, your remodel requires you to redo your plumbing or electrical network. This requires you to hire specialists like plumbers and electricians, and their expertise comes at a cost that will increase the rebuild value.
- Additional floor space. Any addition to your bathroom’s floor space will add to your home’s overall value, as well as the costs of a rebuild.
If your home’s rebuild value is higher than your insurance cover, you may need to increase your insurance coverage. This ensures that your entire property is protected adequately. For this, you may need to review and update your insurance policy. Note that you may need to pay higher premiums once your policy was updated to cover your remodel’s added rebuild value.
How to Determine Rebuild Cost For Home Insurance?
To understand the rebuild value of your home after your bathroom remodel, you will have to estimate the costs of rebuilding the entire house after a total loss. In case of a bathroom remodel, you only need to take the costs involved in this project into account. This includes the new materials used, the labor expenses involved, and the cost incurred by any upgrades done to the bathroom. Add your estimate to the previous rebuild value of your home minus that of your previous bathroom construction.
If this sounds complicated, that’s because it is indeed complicated. Your best alternative to this DIY approach is to get professional valuation through a home survey performed by a qualified contractor. You can also use an online building replacement calculator, such as this one from Allianz.
Note that your home’s rebuild value is different from its market value. We’ve already defined the former as the estimated cost of rebuilding your property following its complete destruction. Meanwhile, the latter is the estimated selling price of your home based on various factors, including the house’s condition, size, and proximity to local conveniences and services. The market value can be lower or higher than the property’s rebuild value and original purchase cost.
Do I Need to Tell My Insurance Company About Renovations?
Insurance companies usually require and encourage their clients to report any and all renovation projects, including bathroom remodels. It is in the best interest of the homeowner to do so, mainly for the following reasons:
Increase in rebuild value
Your bathroom remodel may inadvertently increase your home’s rebuild value. This increase may go above your insurance’s coverage. Reporting your renovation informs your insurance company of this change, allowing them to adjust your policy limits to maintain adequate protection in case of loss or damage due to a covered event.
Potential change in risks
Certain upgrades to your bathroom may change your home’s risk profile. This will either increase or decrease the likelihood and severity of certain claims.
Possible policy violations
Some insurance providers require homeowners to inform them of any renovation done to their property. Failing to do so constitutes a breach in the terms of your policy. This could lead to potential issues with your coverage or possible denial of future claims.
Avoidance of future issues
Being transparent with your insurance company gives them a clear understanding of any updates you’ve made to your property. This could help you avoid disputes when you need to file a claim.
To Sum Up
You can only get your homeowners insurance to pay for your bathroom remodel if renovation is the only way to restore your bathroom following substantial damage from an unforeseen, destructive event. The opposite is true for deliberately planned bathroom remodel projects. In both cases, the remodel could adjust your home’s rebuild value—a fact that you need to report to your insurance company for transparency and policy coverage adjustment.
