Can you explain the difference between betterments and improvements vs additions and alterations?

Two terms that you may encounter in your home insurance policy are "betterments and improvements" and "additions or alterations." Even though the terms seem to describe the same thing, they are used for vastly separate purposes in insurance terminology. The phrases are more commonly used in commercial insurance, but they are used in condominium insurance as well.

Betterments and Improvements - This typically refers to upgrades to the property. This might include fixtures, equipment, appliances, or other changes which have been made to existing portions of the home. For example, putting in a new set of kitchen cabinets would be a betterment or improvement, but so would bathroom fixtures, light fixtures, or upgrading the HVAC unit. Remodeling a bedroom would be a "betterment", or improvement, adding a new one would not.

Additions and Alterations - This term is commonly used to refer to things which have been added to the home, altering it completely. A new deck is an addition or alteration, and so is adding on a new bedroom. Similarly, converting a den into a bedroom transform the space from one intended purpose to another, and is classified as an addition or alteration. The rule of thumb is that if it is new, or alters the existing use, it is an addition or alteration, but if it simply improves on what was already there, it is a betterment or improvement.

Both terms can have an impact on your insurance premiums. Since you are increasing the home value, your rates are subject to increase for most purposes, but if you add a home security system during the process, you can offset the increase with a discount for making the home more secure. Look for other home insurance discounts, including a multiple policy discount that can further offset the cost of condo insurance.