Most home-insurance policies require that you insure your home to at least 80% of its replacement value. According to experts, 25% of renovation efforts raise a home's value more than 20%. If your renovations make your residence into a dream home, chances are you'll need to raise the amount of your homeowner's policy to reflect the change. Otherwise, you could be stuck with a big chunk of the bill if a fire or other catastrophe forces you to make a claim. Remember, too, that your homeowners insurance covers the building materials that will pile up in your garden before you begin work.

That's a reason to raise your coverage limits before you begin any work on your house because there is a higher risk of things going wrong. For example if a fire struck and destroyed both your home and the building materials, you might not be covered for the full extent of the damages unless you've revisited your coverage limits.

It's not just your home's higher value that should figure into your insurance calculations. Whether you do the job yourself, with family and friends, or hire a contractor or renovation firm also affects your insurance needs. If, like most homeowners, you hire an outside person or firm, ask the contractor if he has adequate insurance coverage before the work begins. He should provide proof of insurance, in the form of a "certificate of coverage," for workers' compensation and contractor's liability coverage. Workers' compensation insurance covers injuries to the contractor and his employees while they're doing the work. If a worker were injured in your home and the contractor did not carry workers' comp, you could be sued, and your homeowner's coverage won’t pick up the bill.

Contractor's liability insurance covers the contractor for damage to your property while it's under construction. If there's a big hole in an outside wall and the contractor fails to cover it properly during a rainstorm, water could leak in and cause major damage. Though homeowner's insurance will cover these damages, your home-insurance company will expect the contractor's insurance company to pick up the tab if you make such a claim.

A reputable contractor will have this coverage and will be used to providing a certificate for proof of insurance. For the do-it-yourself home-repair guru, your insurance requirements depend on who's helping you and whether you are paying them for the help. A friend or family member who's injured while lending a hand can have his or her medical bills covered by your homeowners policy. However, hiring a subcontractor or paying someone to help you makes you an employer, which means you must purchase workers comp to cover your liability in the case of an injury.

Insurance tips for home renovating.

Having people you don't know working in your home can increase the risk of theft. Even though there's no more danger with a builder than with a cleaning or repair service, it makes sense to protect any valuable personal property.

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