Does Homeowners Insurance Cover Renovation?

Homeowners often undertake renovation projects to enhance their living spaces and increase property value. Understanding how your existing homeowners insurance policy applies to these projects is important for protecting your investment. This article clarifies the relationship between homeowners insurance and renovation work, detailing what coverage you might have, what additional protections you may need, and the steps to take with your insurer before, during, and after your project.

Existing Homeowners Policy Coverage During Renovation

A standard homeowners insurance policy, such as an HO-3 or HO-5, provides coverage primarily for an occupied dwelling and personal property against specified perils like fire, theft, or vandalism. During a renovation, aspects of this existing coverage may still apply. For instance, if a fire, unrelated to the construction, damages a portion of the home or materials stored on-site, your dwelling or personal property coverage might respond. Similarly, the personal liability section of your policy could offer protection if a non-involved guest sustains an injury on your property during the renovation, provided the injury is not directly related to construction activities.

However, standard policies are not designed for the unique risks of construction. Limitations arise when structural changes are underway or the home becomes unoccupied for an extended period. Many policies reduce or eliminate coverage if a property is vacant for a specific duration, commonly 30 to 60 days. Insurers impose these restrictions because an unoccupied home is perceived as a higher risk for vandalism, theft, or undetected damage.

Standard policies exclude damage directly resulting from construction activities, errors, or faulty workmanship. If a structural beam is improperly installed or a new plumbing line leaks due to a contractor’s mistake, your homeowners policy would not cover the cost of correcting the issue. The policy also does not cover theft of construction materials or equipment.

The presence of contractors and workers introduces liability exposures your standard policy may not fully address. While personal liability coverage may extend to some third-party injuries, it has limitations regarding professional activities or those you employ. Standard policies are built on the premise of a residence, not an active construction site, making them less suitable for the risks of renovation projects.

Specific Renovation Insurance Needs

For extensive renovation projects, relying solely on a standard homeowners policy is insufficient. Consider builder’s risk insurance, also known as course of construction insurance. This policy is designed to protect a building under construction or renovation, covering the structure, on-site materials, and equipment against risks like fire, theft, vandalism, and severe weather. It can be purchased by either the homeowner or the general contractor, and it is necessary for major structural changes, additions, or new home construction.

Beyond property damage, renovation projects increase liability risks. The presence of workers, increased foot traffic, and potential hazards on a construction site increase injury risk to workers or visitors. While your existing policy offers some liability protection, the limits may not be sufficient for the increased risk during a renovation. Increasing your liability limits or purchasing an umbrella insurance policy provides broader coverage and higher limits beyond your standard policy, often $1 million to $5 million in additional coverage.

Homeowners who directly hire individuals for their renovation project, rather than working through a licensed general contractor, may face workers’ compensation responsibilities. While a reputable general contractor carries workers’ compensation insurance for their employees and subcontractors, a homeowner acting as the general contractor may be legally responsible for injuries sustained by workers they directly employ. This exposure can vary by jurisdiction, but it is an important consideration to discuss with your insurer or legal counsel for compliance and protection.

These specialized coverages address the perils and liabilities of construction, filling standard policy gaps. They protect the property and activities, safeguarding financial interests during heightened risk.

Communicating with Your Insurer

Before beginning any renovation project, contact your homeowners insurance provider to discuss your plans. Early notification allows your insurer to assess the impact of the renovation on your current policy and advise on adjustments. This helps avoid coverage gaps or policy violations from changes to your property’s risk profile.

When communicating with your insurer, provide detailed information about the scope of your renovation. This includes the nature of the work, including structural changes, additions, or interior modifications. Also share the estimated timeline, total budget, and contact information for general contractors or subcontractors.

Disclose whether your home will be unoccupied during any phase of the renovation. Vacancy clauses in standard policies can suspend or reduce coverage if the home is left empty. Your insurer needs this to determine if an unoccupancy endorsement or builder’s risk insurance is required for continuous coverage.

Based on the information you provide, your insurer will review your existing policy and recommend necessary endorsements or additional policies. They can explain how your current dwelling, personal property, and liability coverages may be affected. This ensures your insurance protection aligns with your property’s evolving risks.

Adjusting Your Policy After Renovation Completion

Once your renovation project is complete, notify your homeowners insurance provider to update your policy. Improvements like added square footage, upgraded kitchens or bathrooms, or new features increase your home’s replacement cost. Updating your dwelling coverage to reflect this increased value is important to ensure adequate protection in the event of a total loss.

Failure to adjust dwelling coverage could result in being underinsured, meaning your policy may not provide enough funds to rebuild your home after a covered peril. Your insurer will request details of the completed work, including final costs and enhancements, to help determine the appropriate new coverage amount. Providing detailed documentation, such as contractor invoices, permits, and appraisal reports, facilitates this adjustment.

Beyond the structural value, consider how renovation affects your personal property and liability coverages. If new built-in appliances, custom cabinetry, or high-value fixtures were added, these may impact personal property coverage. Similarly, additions like a new swimming pool, a large deck, or a new fire pit introduce liability exposures.

Your insurer can help you assess if personal property limits need increasing or if additional liability endorsements are advisable for new features. Maintaining accurate records of all renovation costs and improvements benefits future insurance claims or property appraisals. These post-renovation adjustments protect your investment and ensure your policy remains comprehensive and current.