Home Renovation Projects That Can Increase Insurance Premiums

A home renovation can breathe new life into your space adding value, comfort, and style. But there’s one upgrade many homeowners don’t plan for: a higher home insurance premium.

Whether you’re adding a swimming pool, finishing the basement, or upgrading your kitchen with high-end appliances, certain improvements change the way insurers assess your home’s risk and replacement cost. That can mean a noticeable bump in your policy price.

Let’s break down which renovations tend to trigger premium hikes, why insurers charge more, and how you can manage the cost without sacrificing protection.

Why Do Renovations Affect Your Insurance?

Home insurance isn’t just based on market value it’s based on replacement cost. That’s what it would cost to rebuild your home with similar materials and features in case of a loss, like a fire or storm. When you make upgrades, you’re essentially raising that replacement cost.

Insurers also evaluate liability risk. If your renovation increases the chances of someone getting hurt on your property (think: pools or decks), you’ll likely pay more to reflect the increased risk.

Renovations That Can Raise Your Premiums

Here are some of the most common home improvement projects that lead to higher insurance costs:

1. Swimming Pools and Hot Tubs

Adding a pool can increase your home’s value and your insurance. Pools are considered an “attractive nuisance,” meaning they pose a significant liability risk, especially if someone is injured or drowns.

Premium Impact: Expect a 5–10% increase in liability coverage needs
What Insurers Look For: Fencing, locks, alarms, and non-slip surfaces

2. Home Additions and Extensions

Adding square footage like a new bedroom, sunroom, or second story increases your home’s rebuild cost. More space means more materials, more labor, and a bigger bill if disaster strikes.

Premium Impact: Increases are proportional to size and quality of materials
Tip: Recalculate your replacement cost with your insurer after the project

3. Finished Basements

Finishing a basement adds valuable living space, but it’s also more vulnerable to flooding or water damage. If you install expensive flooring, bathrooms, or built-ins, expect your insurer to adjust your policy.

Common Add-ons: Water backup coverage or sump pump failure protection

4. High-End Kitchens and Bathrooms

Luxury countertops, custom cabinets, and professional-grade appliances all add cost to a rebuild scenario. Even swapping laminate for quartz can change your coverage needs.

Premium Impact: Premiums may increase if total replacement cost jumps
Best Practice: Keep receipts and photos for documentation

5. Home Offices and Studios

If your home renovation involves turning a space into a dedicated office, salon, or recording studio, it may change your home’s classification — especially if clients visit.

Insurance Note: You may need additional business property or liability coverage

6. Detached Structures (Sheds, Studios, Guest Houses)

New outbuildings usually aren’t covered under your standard dwelling policy unless you extend coverage.

Tip: Add “other structures” coverage to protect investments outside the main house

Why Insurers Charge More After Upgrades

Your premium reflects two main risks:

Rebuild Cost: If your home burns down, your insurer must pay to restore it — and a luxury kitchen costs more to rebuild than a standard one.
Liability Risk: Pools, trampolines, and decks can lead to injury claims. Insurers factor in these hazards when setting rates.

If you’ve made changes that increase either factor, your premium will go up to account for that added exposure.

Tips to Offset Premium Increases

While you can’t always avoid a price bump, here are smart ways to balance your premium after a major upgrade:

1. Bundle Your Policies

Combine your home and auto insurance with the same company to save up to 20% on both.

2. Increase Your Deductible

Raising your deductible from $500 to $1,000 or $2,500 can significantly lower your annual premium — just make sure you can afford it in a claim scenario.

3. Add Protective Features

Install smoke detectors, alarm systems, water leak sensors, and smart home tech. Insurers often offer discounts for safety features that reduce risk.

4. Ask About Loyalty or Upgrade Discounts

Some insurers reward policyholders who stay with them or who upgrade their homes with energy-efficient systems or storm-resistant materials.

5. Shop Around

After a major renovation, it’s wise to get new quotes. Some companies weigh risk factors differently — and you might get a better deal elsewhere.

Document Everything

Keep detailed records of your renovation, including:

Receipts for materials and labor
Before-and-after photos
Permits or inspection records

This documentation helps your insurer update your replacement cost and can speed up claims processing if anything happens.

Don’t Forget to Notify Your Insurer

Failing to report major home changes could result in insufficient coverage or denied claims. Always update your insurer after a renovation — it’s usually simple and can prevent major headaches later.

Renovating your home should make it better not riskier. By understanding how improvements affect your insurance and planning ahead, you can protect your investment and your peace of mind.