Homeowners often enjoy making improvements to their property for myriad reasons: potentially improving the house value, aesthetic impact and lately due to Covid-19, adding work from home space either for part of the work-week, or permanently.
As enjoyable as it is to improve one’s castle, there are two major mistakes homeowners make when embarking upon a project. First, not taking out permits if it’s a do-it-yourself project, or getting copies of the permit when a contractor does it. Second is increasing your homeowner’s policy to account for a greater replacement cost in case of disaster or damage.
The first mistake, a lack of a permit, can have disastrous effects. If you do not have legal permission to build or enhance a property and there is an accident your insurance carrier may not pay out as a result of the work done, particularly if the work was done wrong. One of the common reasons property owners don’t take out permits is to save money on a potential property tax increase, as well as the permit fee. This is very short-sided thinking. As an example of how bad it can be is one homeowner in Connecticut had an extension built and the code called for lighting in the closet to have fluorescent lighting, which the contractor did in fact install correctly. After the town approved the construction, the homeowner replaced the fluorescent fixture with an incandescent fixture, which of course can get hot unlike fluorescent.
Sadly, the incandescent bulb failed and caused a fire and the entire home was destroyed. The insurance carrier found out that the permit was not followed by virtue of the homeowner’s replacement, and did not pay out, financially devastating the homeowner. The very purpose of a building permit is to ensure safety, so making an unauthorized alteration or worse yet, no permit can have grave ramifications.
Lack of a permit can get you into other troubles, including local tax avoidance issues, property set back requirements and conflict with neighbors depending on the scope and nature of the project. Most local building officials are accommodating and informative and can be a helpful aid in the process.
The second common mistake is to not upgrade ones homeowner’s policy prior to the work commencing. Every project is unique, and every state and insurance carrier have their own requirements about coverage during and after a project is completed. The last position you want to be in is being under-covered in a time of great stress after an accident or disaster, especially after putting in hard work and hard-earned dollars into your new project.
Finally, if your project has a significant cost associated with it, you should speak with your financial advisor for a second set of eyes to review the benefit cost analysis, weigh funding options, and be clear-eyed about any increase in ongoing costs associated after the project is done.
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