Make sure you have enough home insurance for your upgraded garage

Linda Melone

Aside from parking a car in it and storing a few bicycles and lawn tools, most people don't give their garage much thought. However, some homeowners take a different view and deck out their garages with all the comforts of their home, such as high-end finishes, hot and cold running water and flat-screen TVs. Not only do these changes transform storage space into a living space, they also change your home insurance needs.

garage insuranceEighty-five percent of American single-family homes have garages, according to Home Innovation Research Labs, a market research company and subsidiary of the National Association of Home Builders, a Washington D.C.-based trade association. Twenty-nine percent of all homes built in 2011 have a three-car garage or larger. These larger garages typically have higher ceilings and more square footage than traditional one- and two-car garages.

Some owners convert their garages into giant man caves. Men make up the primary users of garages at 70 percent, according to Home Innovation Research Labs.

Insurance coverage for an upgraded garage

Homeowners may try to save money by turning part of their garage into an additional bedroom, says Dan Derkum, owner of Dad's Construction, Laguna Hills, Calif. "Over the last 15 years I've seen more people starting to do that. People need more space but can't afford to move, so they look at renovating their garages."

People with tandem garages one long garage that fits three cars) are most likely to consider this option. "What they don't realize is that you need to first check with your city to see if it's allowed. Most times it's not," Derkum says.

Derkum says when their application is rejected, homeowners often hire an unlicensed contractor or do the renovation themselves.

Adding a bedroom in an area that also contains water heaters and furnaces puts you at risk for fires and carbon monoxide poisoning.

And don't count on your home insurance to protect you if something happens to your converted garage. Your homeowner's policy may not cover you if you have an accident or a fire in this illegal, added-on bedroom, Derkum says.

"Check with your insurer. Making any of these changes without first consulting with your insurer can get you in trouble if you have to file a claim," says Rose Marshburn, a personal lines specialist with SIA Group, an insurance agency in North Carolina.

Upgrading your policy

On a standard home insurance policy, the garage is considered an "other structure" if it isn't attached to the home. "You want to be sure you have enough ‘other structure' coverage to replace the garage and its contents if something happens," Marshburn says.

If you increase the content of your home including the contents of your garage, if it's attached to your home) by adding upgrades such as TVs and other items, you can increase the coverage to match the replacement value, Marshburn says.

Replacement value is how much it would cost to replace damaged items with new ones. Alternatively, you could be insured for "actual cash value," which covers the cost of your belongings at the time of the loss and not at the time of purchase. Marshburn doesn't recommend this coverage. "Actual cash value coverage) costs less than replacement value, but since value decreases over time) you'd never be able to replace those items at the original cost."

Insuring household content

If the garage is attached to the house, it's part of the "dwelling amount," Marshburn says. "The contents would then be included in the insured's personal property limit." Although it may vary from state-to-state, in North Carolina, replacement cost of household content is typically 70 percent of the dwelling value. So if you live in a $300,000 home, your contents are covered up to $210,000.

Any damage to cars stored in your garage would be insured on your auto policy under a separate, auto insurance claim.

If you display expensive artwork, antique rugs, jewelry or unique things in your garage you should have them on a separate "inland marine policy" a policy with additional coverage beyond traditional home insurance) or they will not be covered.

"Increasing your coverage will naturally increase your premium amount," Marshburn says. The amount your premiums increase depend on how much additional coverage you add.

Adding luxury accommodations to a garage, such as a movie theater or a car lift to showcase expensive cars, is not something all carriers will accept, says Michael Silverman, president of the Gloron Agency, Inc., an insurance agency based in NYC. "The home policy must be amended to reflect the added value."

A specialty insurance agent such as Fireman's Fund or Chubb may be your best bet in such a case, Silverman says.

When someone makes changes like this to the home, you should consult a professional insurance agent to ensure you get the correct amount of coverage, Silverman adds.

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