Don't Forget to Review Homeowners Insurance
A home equity loan is a great way to get funds to add on or improve your current home. Once the construction is complete – or, in fact, while construction is underway – make sure you review your current homeowner’s policy and adjust your coverage to reflect the new value of your home.
Most policies provide either a fixed amount or “replacement” coverage. (Just like it sounds, replacement coverage is designed to pay the amount required to replace your home if it is damaged or destroyed.) In either case, make sure your policy covers the current value of your home, and not just the “old” value. If disaster strikes, your insurance may be the only protection you have – when you refinance to make improvements, make sure you have the protection you need.