(BPT) – Home renovations can be expensive. In fact, an average home renovation cost $22,000 in 2022, according to Houzz research. Even with the cost being substantial, more than half of homeowners say they’re planning on undertaking a renovation in the coming year. While making those investments in your home, reviewing important insurance considerations can ensure you’re not putting your financial future at risk.

Considerations for working with a contractor

Mishaps during renovations can be costly. To mitigate some of your risk, any contractor you work with should have the following:

Contracting License — Ensures the legality of your renovation and provides peace of mind knowing your contractor is sufficiently knowledgeable.General Liability Insurance — Provides protection against the cost of property damage and injuries that may occur during the renovation.Workers’ Compensation — Provides financial protection in case workers are injured while working on the project.

John Lack was a contractor for 35 years before joining Acuity Insurance as the carrier’s construction consultant. He has the following suggestion for getting this documentation from your contractor:

“Just ask. Reputable contractors expect to provide this information to you. You should always work with a licensed contractor. As for insurance, they should be able to provide you a certificate of insurance (COI). That COI should include three things: your name as an additional insured; the policy-in-force dates, which should span the entire time they will be working on your home; and their coverages.”

How home renovations can impact your homeowners insurance

If you’re undertaking a small renovation like changing paint colors, updating carpet, or adding a backsplash, that will likely not impact your homeowners policy limits. If your renovation is more extensive, like adding an addition, remodeling a kitchen or adding a bathroom, you may be changing the value of your home enough to need a change in your homeowners insurance limits. Consider how much your home would cost to rebuild — not the market value. If your renovation increases the amount it would cost to replace everything you have, you should change your limits.

One renovation that may reduce your cost of insurance is replacing your roof. If you replace your roof, be sure to report the update to your agent. Many insurance companies will provide broader coverage and possibly a reduced price for newer roofs.

It’s best to talk with your independent insurance agent about how your renovation might impact your insurance needs. They can help ensure you’re covered and that your investment is adequately protected.