Adding a detached garage, storage shed, workshop, or similar structure can give you more room for vehicles, tools, hobbies, and storage. It can also change the value and risk profile of your property, making it a good time to review your homeowners insurance.
Before construction begins or soon after the project is completed, consider discussing the addition with your insurance agent. The size, construction, intended use, contents, and location of the new structure can all be important when reviewing your policy.
How Homeowners Insurance Treats Detached Structures
Many homeowners insurance policies include coverage for structures that are physically separated from the home. This is commonly referred to as "other structures" coverage and may apply to detached garages, sheds, fences, gazebos, and certain other structures on the property.
The amount of insurance available for detached structures is often based on a percentage of the dwelling coverage limit. However, policy terms, limits, exclusions, and eligibility can vary by insurance company and policy.
A small garden shed may fit comfortably within an existing policy limit, while a large detached garage or custom workshop could require a closer review.
Consider the Cost to Rebuild
One of the most important questions is how much it could cost to repair or rebuild the new structure after a covered loss.
Construction costs can add up quickly when a detached building includes features such as:
- Finished walls and ceilings
- Electrical service
- Plumbing
- Heating or cooling
- Insulation
- Built-in cabinets or workbenches
- Specialty doors or windows
- Higher-end roofing or siding
A structure that costs significantly more than a typical storage shed may affect whether your existing other structures limit is appropriate.
Adding a substantial building to the property may also be a good reason to review the replacement cost of the home itself, particularly if other improvements have been made since the policy was last updated.
Think About What Will Be Stored Inside
The building is only part of the consideration. What you plan to keep inside may also affect your insurance needs.
Detached garages and workshops often contain lawn equipment, power tools, bicycles, sporting equipment, automotive tools, and other valuable personal property. Certain categories of property may be subject to special limits or exclusions under a homeowners policy.
If you plan to store expensive equipment, collectibles, business property, or other higher-value items in the new structure, discuss those items with your agent rather than assuming your existing policy limits are sufficient.
Using the Building for Business
A workshop sometimes starts as a personal project space and gradually becomes a place where someone repairs equipment, builds products, stores inventory, or operates a small business.
That distinction matters.
Homeowners insurance generally has limitations involving business activities and business property. If customers visit the property, employees work there, inventory is stored there, or the building contains equipment used primarily for a business, additional insurance considerations may apply.
Tell your insurance agent how the structure will actually be used so your personal and business insurance can be reviewed accordingly.
New Liability Risks
A detached garage, shed, or workshop can also introduce new liability concerns.
Power tools, machinery, electrical equipment, elevated storage, and other features can increase the chance of an injury. If friends, neighbors, customers, or other visitors regularly enter the building, consider how that changes activity on the property.
This can also be a good opportunity to review your personal liability limits and discuss whether personal umbrella insurance may make sense as part of your overall insurance program.
Fire and Electrical Considerations
Workshops and garages may contain additional sources of fire risk, particularly when they include electrical equipment, battery chargers, heating systems, woodworking equipment, or flammable materials.
Electrical work should be completed in accordance with applicable codes, and any heating or specialty equipment should be properly installed and maintained. Some insurance companies may ask questions about electrical service, heating methods, fuel storage, or how a detached building is being used.
Keeping the structure organized and safely storing fuels, paints, solvents, batteries, and similar materials can also help reduce unnecessary risks.
Tell Your Insurance Agent About Major Property Changes
Homeowners sometimes assume they only need to contact their insurance agent when they buy a new home or file a claim. Major improvements to the property are another good reason to have a conversation.
A new detached garage, shed, or workshop can represent a significant investment. Updating your agent gives you an opportunity to review the structure, its contents, how it will be used, and whether changes to the policy should be considered.
Palmer & Associates can help you review your homeowners insurance and discuss how changes to your property may affect your insurance needs. Contact us if you are planning a new detached structure or have recently completed one.