Made Home Improvements in 2023? Here's Why You Need to Contact Your Insurance Company ASAP

In 2020, many homeowners were willing to sink money into improving their living spaces. And that made sense.

That year, a lot of us were stuck at home as a result of the pandemic. And a lot of us were also saving money since we had nowhere to go. So it stood to reason that a lot of homeowners would take the money they'd otherwise spend on things like leisure and travel and instead invest in making their living spaces more comfortable.

The home improvement boom has since died down a bit, partly due to the reopening of society and partly due to inflation driving the cost of renovations up. Also, borrowing costs are up as a result of the Federal Reserve's interest rate hikes, which means homeowners may be less likely to tap their equity to make improvements.

But while the home improvement trend may have cooled off compared to 2020, a survey by Today's Homeowner conducted earlier this year found that 90% of U.S. homeowners still had renovation projects planned for 2023. If you made improvements this year, there's one important follow-up move you ought to make.

Keep your homeowners insurance company in the loop

Any time you make changes to your home, it's important to get in touch with your homeowners insurance company and let it know. It's especially important to loop in your insurer if you've made significant changes that could impact the value of your home.

The reason? Your homeowners insurance policy is designed to cover the cost of damage to your home, as well as cover the cost of rebuilding your home should it get completely destroyed. But if your home is now worth a lot more than it was a year ago in the wake of your improvements, its replacement cost may be higher. That needs to be reflected in your homeowners insurance policy to make sure you have adequate coverage.

Once you contact your insurer, it will probably ask questions about the specifics of your renovation. You'll need to be prepared to offer up details, which could include the cost of the work that was done.

Will home improvements drive the cost of your insurance up?

In some cases, renovating your home could lead to higher insurance costs. Let's say you've finished your basement and now have an additional 800 square feet of usable living space as a result.

If your home were to be destroyed, it would cost more to rebuild it with a finished basement included than to rebuild it without a finished basement. So in that situation, you may see an uptick in your premium costs.

However, not every renovation is guaranteed to result in an increase. You may not see your costs go up, for example, if you've simply swapped out your existing kitchen cabinets for new ones of similar materials that better suit your taste.

Also, you may find that the cost of homeowners insurance goes down following certain improvements. Let's say you decided to fence in your yard. If you live in an area with a lot of damage-causing wildlife, you can make the argument that a fence offers added protection, which could result in lower insurance costs (though to be clear, this is by no means guaranteed and will depend on your specific insurer).

All told, it's a good idea to communicate with your insurer when you make changes to your property. So even if you took on a seemingly small home improvement project this year, it's still smart to share that information with your insurance company and see where that takes you.