Should I tell our insurance company about a reno?

Brian, yes, tell them, and the reason is mechanical rather than moral. A finished basement raises what it would cost to rebuild your house, and the dwelling limit on your policy is the number that has to move. Here is the structure the other answers gestured at without naming. A homeowners policy is built in lettered parts. Coverage A is the dwelling. Other structures, personal property and loss of use are usually set as a percentage of Coverage A. So when you add finished square footage and the carrier never updates Coverage A, you have not just underinsured the basement. You have underinsured the entire house and quietly dragged every other limit down with it. Now the part almost nobody mentions. Most property policies carry a coinsurance or insurance-to-value condition, commonly set at 80 percent of replacement cost. If your dwelling limit falls below that threshold, the carrier can settle claims proportionally, reducing recovery in proportion to the value that was uninsured. Read that again, because here is the sting: that reduction applies to any covered loss, not only a basement loss. Kitchen fire, wind damage to the roof, tree through the dining room, same haircut. Being underinsured is not a basement problem. It is a whole-policy problem. Two coverage gaps specific to what you just built. First, water backup. Standard homeowners policies exclude water that backs up through sewers or drains and water that overflows or discharges from a sump. That is the single most likely loss in a Chicago-area basement, and you now have drywall, flooring and probably a television sitting in its path. It takes a specific endorsement, usually called water back-up and sump discharge or sump overflow coverage. It is cheap, commonly around 50 to 250 dollars a year, but it carries its own sublimit that often starts near 5,000 dollars. Ask for a limit sized to what it would cost to rebuild what you just finished, not the default. Second, flood. No homeowners policy covers flood, ever. That is a separate NFIP or private flood policy. One update since you asked in 2024: NFIP reauthorization has been a repeating congressional deadline, with the current one tied to September 30, 2026, so if you go that route have your agent confirm program status the day you bind. The downsides, honestly. Your premium goes up, because your replacement cost went up. That is not a penalty, that is the coverage actually working. And yes, the carrier may ask about permits. Which brings me to the one thing I would not leave alone. You said permits were not required. Please confirm that in writing with the Village of Forest Park building department, because across Chicagoland finishing a basement usually triggers permits the moment framing, electrical or plumbing is involved, and Forest Park requires permits for exactly that kind of work. You can reach their building department at [email protected] or 708-615-6276. If it turns out something should have been permitted, you can usually pursue a permit after the fact. That costs money and it is annoying. It is still far better than learning it from an adjuster while you are standing in six inches of water. I am a real estate professional, not an insurance agent, so take the coverage details to your carrier and get the endorsement in writing. I am Zoltan Peresztegi and I work in Los Angeles and the South Bay, so I am not your local agent, but I would be glad to connect you with a strong Forest Park or west suburban Chicago agent from my network if you ever want a read on what that finished basement did to your value. Zoltan

Brian, transparency is key to insurance companies, so yes, make sure to give them a heads up. Some insurance policies can deny claims when they are not awar of changes made since policy issuance. Keith Jean-Pierre Managing Principal The Dapper Agents Operations In: NY, NJ, FL & CA

Yes, tell them. The upside of updating your policy is that your finished basement is now covered. The downside of not telling them is that if something happens, your claim could be denied. When you finish a basement, the value of your home increases because you've added livable square footage. Your homeowners insurance policy is based on what it would cost to rebuild your home if it were destroyed. If your policy doesn't reflect the finished basement, you're underinsured. If a pipe bursts and floods your new basement, or a fire damages it, the insurance company could deny or reduce the claim because the finished space wasn't included in your coverage. Your premium will go up slightly to reflect the increased replacement cost, but the alternative is paying out of pocket for damage to a space your policy doesn't know about. That's a much more expensive outcome. Call your insurance company, let them know you finished the basement, and ask them to update your coverage. It's a five-minute phone call that protects a renovation you've already invested in.

Brian, It is human nature that we want to keep our costs down, but insurance companies have become skilled at finding ways to not pay out claims. I feel that the marginal increase in premiums is not worth the risk to the remainder of my asset to not notifying them about an increase in living area in your home.

I would tell them in case of a fire etc. or the damage down there wont be covered.

I would recommend letting your insurance company know of the updates so they can adjust your insured value in case something happened in your basement that you needed to file a claim.

I would recommend letting you Insurance carrier know. The benefits is you have updated your policy to include your renovation and extra sq ft of finished area . Your down side may be a small insurance price increase due to the nice renovation. I feel the it beneficial for you to update .

Illinois may have different laws, but in california, If it adds value, I would definitely let the insurance company know. Especially if you would like the insurance to repair it.

Now that it is actual living space -- you may wish to cover the space in case of claim/damage in the future. Yes, your premium may increase. The other thing to think about is taxes -- many times it will not be taxed or taxed as equal to above ground living space if not permitted. If you finished this are for a family member with a disability -- there could be credits involved. You have definitely increased the value of your property!

Hey Carlos! I would think you would want to update your policy to include the finished basement for replacement value!