Most homeowners start planning renovations with a goal to make the space better. Maybe it’s a kitchen refresh, a security upgrade, a rooftop solar installation, or that extra bedroom you’ve been dreaming about. But somewhere between picking tile samples and choosing a contractor, one detail that gets ignored is how that renovation will change your home insurance premiums.
It might surprise you that some improvements can nudge your premiums upward, while others can shave costs off your annual bill. Several upgrades even do both at the same time, depending on how they change your home’s risk profile. Insurers continuously assess how likely you are to file a claim, how expensive that claim might be, and what new risks you’ve introduced.
Understanding these dynamics helps save money and keep your coverage aligned with your home’s true value. Below is an in-depth look at why renovations impact premiums, the projects most likely to increase costs, the ones that can reduce them, and the surprising upgrades that do both. We’ll also look at practical ways to navigate insurance adjustments smoothly so your coverage stays accurate and affordable.
Why Renovations Affect Insurance at All
Home insurance is built around replacement costs. When you renovate, you are modifying that cost, sometimes dramatically. If you install imported marble floors, expand your living space, replace your roof, upgrade electrical wiring, or install a swimming pool, your home becomes a new version of itself. Insurers must account for this.
Risk is the second half of the equation. Insurance companies use data models, local building codes, and claims statistics to determine what renovations make your home safer versus more vulnerable. For example:
- A new roof often reduces wind and weather-related claims.
- Outdated electrical systems are a major fire risk, so upgrades can reduce premiums.
- Expanding square footage raises replacement costs, which increases premiums.
- Installing a trampoline or pool significantly increases liability risk.
Insurers rely on these risk patterns, often informed by research from groups like the Insurance Information Institute and national claims data. Renovations change your home’s risk profile, so premiums shift to reflect the new reality.
Renovations That Increase Your Insurance Premiums
Some upgrades make a home more beautiful or functional but also increase repair costs or liability. These projects commonly raise premiums.
- Expanding Square Footage
Adding a bedroom, extending the living room, or finishing an attic or basement increases the overall size of your home and therefore, the cost to rebuild it. Because insurance coverage is heavily tied to square footage, these projects routinely raise premiums.
An expanded footprint may also require updated plumbing, electrical networks, or more expensive materials, further increasing replacement value. Insurance companies adjust premiums to match the new coverage needed.
- Major Kitchen or Bathroom Upgrades
High-end renovations (custom cabinetry, quartz countertops, premium fixtures, imported materials) raise the cost of repairs. A kitchen fire or water damage in a luxury bathroom will cost significantly more to fix than in a basic space. Insurers take this into account.
Damage in kitchens and bathrooms is common due to fire, water leaks, and appliance malfunction. Because claims involving these rooms are statistically more expensive, premiums can increase even when no major structural changes were made.
- Installing a Swimming Pool or Hot Tub
Insurance companies categorize pools and hot tubs as liability risks. According to the Consumer Product Safety Commission, pool-related accidents are a leading cause of home-based injuries in the U.S., especially for children. As a result, most insurers increase liability premiums when a pool is added. Some may require safety gates, slip-resistant surfaces, or fencing before coverage applies.
- Adding High-Value Custom Features
Luxury renovations like custom stonework, vaulted ceilings, skylights, or artisan woodwork raise premium costs because the materials and craftsmanship are expensive to replace. Even a high-end sound system integrated throughout the home can push premiums up, since built-in electronics can be costly to restore after fire or water damage.
- Adding a Home Office or Studio
With remote work now mainstream, many homeowners are adding workspaces or converting garages and basements into studios. However, the IRS, insurance carriers, and industry guidance all note that using your home for business increases risk exposure. This can raise premiums, particularly if clients visit the property or expensive equipment is stored there.
Separate equipment coverage may also be required.
Renovations That Can Reduce Your Insurance Premiums
Not all renovations push costs upward. Some improvements make your home more resilient, secure, or energy-efficient reducing the likelihood of costly claims.
- Installing a New Roof
Roofs impact premiums more than almost any other single component. A newer roof, especially one made with weather-resistant materials, reduces the risk of water damage, structural damage, and storm-related claims. Many insurers provide significant discounts for:
- Impact-resistant shingles
- Metal roofing
- Fire-resistant materials
Roof replacement is one of the most reliable ways to lower premiums, especially in storm-prone regions.
- Updating Electrical, Plumbing, or HVAC Systems
Older homes often have outdated systems that pose safety and damage risks. Research from the National Fire Protection Association shows that outdated/malfunctioning wiring is a leading cause of house fires. When homeowners modernize these systems, insurers often reward the improvement.
Electrical upgrades particularly reduce the risk of fire-related claims. Modern plumbing reduces the risk of pipe bursts or water damage, and HVAC upgrades often lower carbon monoxide and ventilation risks.
- Installing Security Systems and Smart Monitoring
Insurers frequently offer discounts for security and burglary-prevention systems, especially those with professional monitoring. Smart systems like fire detection, water leak sensors, or automatic shut-off valves can dramatically reduce claims for water damage or theft.
Data have shown that homes without security systems are. Many insurers reward homeowners who proactively reduce this risk.
- Replacing Old Windows or Adding Storm Shutters
Impact-resistant windows, storm shutters, or double-pane installations help prevent weather-related damage. These upgrades are especially valuable in hurricane-exposed areas. Many insurers offer discounts as part of wind-mitigation programs.
- Energy-Efficient Upgrades
While the main motivation is typically lower utility bills, energy-efficient systems can reduce premiums indirectly by lowering fire risk (example, replacing old furnaces) or reducing the load on outdated wiring. Some insurers offer eco-friendly discounts for:
- Solar panels (installed properly)
- Energy-efficient windows
- Green roofing systems
Be aware that solar installations, depending on the structure and placement, can sometimes raise premiums if they increase roofing replacement costs. More on that below.
Renovations That Can Both Raise AND Lower Premiums
Some projects are double-edged swords making your home safer or more efficient but also increase replacement cost.
- Solar Panel Installations
Solar panels are a prime example of a renovation with mixed effects. They reduce energy costs and can make the home more environmentally friendly, but because panels are expensive and often mounted on the roof, they raise the replacement value of the home. If the roof is damaged, replacing panels adds to the cost of repairs.
However, some insurers offer “green home” discounts, and states may have incentive programs. The National Renewable Energy Laboratory provides guidance on the safety and cost-benefits of solar installations.
- Smart Home Upgrades
Smart home systems (security cameras, smart locks, water leak detectors) can reduce premiums, but fully integrated systems may increase premium costs if they involve expensive equipment that needs to be insured.
- Renovating Historical Homes
Restoring an old home can improve safety when electrical and structural systems are updated. But maintaining historical authenticity often requires specialized materials and techniques, which increases replacement cost. This can raise premiums significantly even as the home becomes safer.
Why You Need to Tell Your Insurer Before and After Renovations
Failing to notify your insurer about home upgrades might save money short-term, but it creates a bigger risk: being underinsured. If your home is damaged or destroyed and its true replacement cost is not reflected in your policy, your insurer may only pay based on the old valuations. This gap leaves you covering the difference out of pocket.
Underinsurance is a well-documented problem. According to reports from the Insurance Information Institute, many homeowners are underinsured by 20% or more simply because they did not update their policy after improvements.
Renovations that change structural features, add square footage, or significantly alter materials must be reflected in your policy so that your coverage matches your home’s value.
How to Plan Renovations Without Unexpected Insurance Surprises
- Talk to Your Insurer Before Starting Renovations
You can get a pre-renovation estimate to know how your premiums may change. Some insurers offer coverage for construction-related risks, especially if contractors are moving walls or upgrading structural systems.
- Ensure Contractors Are Properly Licensed and Insured
Your insurer may require proof of contractor insurance. If workers are injured or cause damage, the contractor’s coverage—not yours—should pay.
- Keep Detailed Records of Costs and Materials
Documenting your renovation helps ensure accurate replacement valuation. Take photos, keep receipts, and store contractor contracts.
- Reassess Coverage After Renovations Are Complete
A new renovation is essentially a new version of your home. Make sure your policy reflects that.
- Shop Around When Necessary
If premiums increase significantly, it may be worth comparing plans. The home insurance market evolves constantly, and some companies specialize in eco-friendly homes or high-end materials.
We believe the information in this material is reliable, but we cannot guarantee its accuracy or completeness. The opinions, estimates, and strategies shared reflect the author’s judgment based on current market conditions and may change without notice.
The views and strategies shared in this material represent the author’s personal judgment and may differ from those of other contributors at IntriguePages. This content does not constitute official IntriguePages research and should not be interpreted as such. Before making any financial decisions, carefully consider your personal goals and circumstances. For personalized guidance, please consult a qualified financial advisor.
