Adding a new structure to your property—such as a garage, shed, guesthouse, or workshop—can increase its functionality and value. However, construction changes can also impact your insurance coverage in important ways that property owners often overlook.
Why New Structures Matter to Insurers
Insurance policies are based on the risks associated with your property. When you build a new structure, you change those risks. Additional buildings increase the total value that would need to be rebuilt after a loss, and they may introduce new hazards, such as electrical systems, plumbing, or specialized equipment that insurers need to account for.
Coverage During Construction
Standard homeowners insurance may offer limited coverage while a structure is under construction, but it is often not enough. Materials stored on-site, partially completed work, and liability for injuries during construction may require a separate builder’s risk policy or an endorsement. Failing to notify your insurer before construction begins can leave costly gaps in coverage.
Impact on Dwelling and Other Structures Coverage
Once construction is complete, your policy limits may need to be adjusted. Detached buildings are typically covered under “other structures” coverage, which is often capped at a percentage of your dwelling limit. If the new structure is large or expensive, that limit may be insufficient, requiring a policy update.
Liability Considerations
New structures can increase liability exposure, especially if they are accessible to others. A guesthouse, rental unit, pool house, or workshop can raise the risk of injury claims. You may need higher personal liability limits or an umbrella policy to ensure adequate protection.
How Property Use Affects Insurance
How you use the new structure matters. A personal storage shed is viewed differently than a home office, rental space, or business workshop. Some uses may require endorsements or a separate policy altogether, particularly if income is involved.
At AFI Insurance, We’re Proud To Serve Denver, CO
If you’re looking for a home insurance policy, we’re here to help! At AFI Insurance, we’re proud to serve Denver, CO and surrounding areas. Reach out to our team today to set up an appointment with one of our friendly and knowledgeable agents.
