Home Insurance When Renovating: What You Need to Know

Home renovations can transform a living space and increase a property’s utility and market value. These projects introduce unique considerations for homeowners, particularly regarding insurance coverage. Understanding how these projects interact with existing policies and what additional protections are necessary is important. Proactive engagement with insurance matters helps homeowners navigate the renovation process with greater financial security.

How Renovations Affect Current Home Insurance

Undertaking a renovation project can significantly alter a homeowner’s risk profile, directly impacting their standard home insurance policy. Most homeowner policies are designed to cover a completed dwelling, not a property under active construction. If a renovation involves substantial changes, such as structural alterations, additions that increase square footage, or significant upgrades to major systems, the property’s risk of damage or loss can increase during construction.

Homeowners generally have an obligation to inform their insurer about significant property changes. Failure to disclose a major renovation could lead to reduced payouts or even invalidation of the policy if a claim arises from an undisclosed renovation. During construction, the property faces heightened risks, including theft of building materials, vandalism, fire hazards from construction activities, and accidental damage caused by workers. Standard homeowner policies may not adequately cover these increased risks, or they might have exclusions for damages directly resulting from renovation work or an unoccupied status.

Specialized Insurance for Renovations

Given the increased risks with home renovations, specialized insurance policies or endorsements are necessary to supplement a standard homeowner’s policy. One such option is Builder’s Risk insurance, also known as Course of Construction (COC) insurance. This specialized property insurance is designed to protect buildings and structures while they are under construction or undergoing significant renovation. It typically covers physical loss or damage to building materials, fixtures, and equipment intended for permanent installation, whether these items are on-site, in transit, or stored off-site. Covered perils commonly include fire, wind, hail, theft, vandalism, and collapse.

Another specialized coverage is Vacant Dwelling insurance. If a renovation project requires the home to be unoccupied for an extended period, typically beyond 30 or 60 consecutive days, a standard homeowner’s policy may limit or even exclude coverage for certain perils. Vacant Dwelling insurance is designed for properties that are unoccupied and can cover risks like vandalism, theft, fire, and water damage that might go unnoticed in an empty home. Unoccupied properties are considered a greater risk for insurers due to increased vulnerability to undetected damage or criminal activity.

Important Considerations for Coverage

Homeowners undertaking renovations should communicate with their insurance provider to ensure adequate coverage. Notifying the insurer about the project’s scope, timeline, estimated cost, and contractors involved allows the provider to assess potential risks and recommend appropriate policy adjustments. This upfront communication helps prevent coverage gaps and ensures future claims are processed smoothly.

Verifying the contractor’s insurance is important. Homeowners should request proof of the contractor’s general liability insurance, which covers property damage or bodily injury to third parties caused by the contractor’s operations. Confirming the contractor carries worker’s compensation coverage is essential, as this protects the homeowner from financial responsibility if a worker is injured on the property. Requesting to be listed as an “additional insured” on the contractor’s policy can provide an extra layer of protection.

Upon completion of the renovation, homeowners should update their policy to reflect changes in the home’s value. Renovations that add square footage, upgrade finishes, or improve systems increase the property’s replacement cost. Adjusting dwelling coverage limits to match this new valuation ensures the home can be rebuilt to its enhanced standard in the event of a total loss. If the home became vacant during the renovation, the insurer must be informed of the occupancy status change once the homeowner moves back in, as vacancy clauses can suspend certain coverages.