A homeowners policy insures a finished, occupied house. A builders risk policy insures a project in motion, meaning the structure and materials while the work is going on. Most renovations start on the first and end up needing the second. What moves a job across that line usually isn’t the dollar value of the work. It’s whether the project touches the structure, whether you’re still living there, whether materials sit around before they’re installed, and whether a contract makes somebody carry insurance.
Project size is the wrong first question, and it is the one everyone asks
Companies do use dollar thresholds. Many homeowners forms will tolerate a renovation up to a stated amount, or up to a stated percentage of the dwelling limit, without asking for anything else. Above that, an underwriter looks at it.
The trouble is that a small job can be a big insurance problem and a big job can be a small one. Two hundred thousand dollars of cabinetry, stone and appliances in a kitchen that keeps its walls and roof is something a homeowners policy can absorb. Eighty thousand dollars of foundation work that puts the house on cribbing for six weeks is a different animal at any dollar figure, because what’s at stake is the whole structure rather than the value of the work.
So treat the dollar threshold as the thing that starts the conversation with your company, not as the test of what the project needs.
Vacancy and occupancy: the condition that sinks more renovation claims than any other
Nearly every homeowners form has a vacancy or unoccupancy provision. The wording varies. The common pattern suspends or cuts back coverage for certain perils once the dwelling has sat empty for a stated number of consecutive days. Vandalism, malicious mischief, theft, glass breakage and water damage from freezing show up on that list often.
Two words get used interchangeably and shouldn’t be.
Unoccupied generally means the people are gone but the contents are still there. Vacant generally means both are gone. A house stripped to studs with the furniture in storage is usually vacant under the policy definition, even though you drive past it daily and a crew is there every weekday.
Which means the loss most likely to hit an empty renovation site, theft of copper, appliances and fixtures, is the one the vacancy provision tends to suspend. The opposite situation, where the home stays lived in, raises a different set of questions. Occupying a home during a major renovation covers those.
If you can’t say how your form defines vacant, how many days it allows, and which perils it suspends, look that up first.
Structural work changes the question entirely
There’s a line most companies recognize even when the form doesn’t spell it out. On one side is finish work: paint, flooring, cabinetry, fixtures, countertops, appliances. On the other is work that opens the building envelope or changes what holds the house up. Roof removal, wall removal, foundation work, additions, structural beams, anything that needs an engineer.
Once the envelope is open, the house is exposed to weather it never saw before, and a large loss gets much more likely. Once the structure is altered, a partial collapse becomes a live scenario. Underwriters treat those as different risks, and forms often say so through a dwelling under construction provision or a flat exclusion.
If your permit set carries a structural engineer’s stamp, assume the job has to be underwritten as construction rather than absorbed into the policy you already have.
How the existing building gets valued, and where projects go wrong
This is the most expensive misunderstanding in renovation insurance.
A builders risk policy can be written on one of several bases:
- Completed value. The limit equals the finished value of the structure, existing portion plus new work. Premium is usually charged on the full completed value.
- Renovation or contract value. The limit equals the value of the renovation work only. The existing structure isn’t insured on that policy and has to stay insured somewhere else.
- Reporting form. The value grows through the project as work is put in place.
A contractor buying builders risk for their own protection very often buys on the contract value, because that’s the exposure they own. That policy doesn’t rebuild your house. It rebuilds their work.
So ask one question about any builders risk policy on your project. If the whole structure burns down tonight, what does this policy pay? If the answer is the contract value, the existing structure has to stay insured under the homeowners policy, and the homeowners company has to know about the construction and agree to it in writing. Two policies covering two different things is a legitimate arrangement. Two policies each assuming the other one covers the house is a gap.
For the underlying valuation question on the finished home, dwelling coverage versus market value and how much homeowners insurance do I need both apply. A renovation is a good moment to re-estimate the whole number rather than only the new part.
Materials: real coverage in one policy, barely any in the other
A homeowners form usually gives a modest amount for building materials and supplies on the residence premises, sometimes as a percentage of the dwelling limit, and often subject to the same vacancy limits described above. It was written for somebody replacing a water heater, not for a house with deposits down on imported tile, a custom range and four months of millwork.
Builders risk forms are generally broader here. They often extend to materials in transit and to materials in temporary offsite storage, usually with their own sub limits. Who eats a loss depends on ownership, shipping terms and where the materials were sitting, so that gets its own treatment in construction materials in transit on a high value home.
The short version: if a lot of material will exist before it’s installed, the homeowners policy alone is very likely the wrong place for it.
The contractor’s interest versus the owner’s interest
These are genuinely different exposures, and that’s why both sides often buy a policy.
The contractor’s interest is the value of work performed and not yet paid for, their own tools and equipment, and their contractual obligation to deliver the project. Their general liability policy answers for damage they cause to other people and other property. Rebuilding their own unfinished work is a job for their builders risk. General liability versus builders risk walks through the distinction.
The owner’s interest is the whole building, the materials already paid for, the delay in getting your home back, and the liability that comes with owning a construction site.
A well drafted construction contract says which party buys the builders risk, on what valuation basis, for what limit, with what deductible, and who gets named on it. If your contract is silent on that, it’s worth fixing before the first day of demolition. And if you’re running the job yourself without a general contractor, acting as your own general contractor covers what that decision adds.
The exclusions that matter on a renovation
No two forms are identical, but the recurring list is stable enough to work from:
- Faulty workmanship, design, materials or specifications. Most forms exclude the cost of correcting the defect. Some forms cover damage that results from the defect and some don’t, and on a structural project that distinction carries real money.
- Water damage from rain entering an unprotected opening. The classic renovation loss. The roof is off, the tarps fail, and the finish work below is ruined. Some builders risk forms exclude it outright, and some cover it only if reasonable protective measures were in place. Read this one yourself.
- Earth movement and flood. Excluded in the great majority of property forms. Both can be insured separately. On a job that involves excavation or a hillside, that’s not academic.
- Employee and contractor theft. Often excluded or narrowly limited. Theft by unknown parties is usually covered. Theft by people who are supposed to be on site often isn’t.
- Testing. Damage during testing of mechanical or electrical systems is commonly excluded or limited.
- Delay, loss of use and soft costs. Almost always excluded from the base form. Soft cost coverage, which can pick up additional interest, permit re-filing, design fees and the like, is generally a separate purchase.
- Wear, tear, deterioration and existing defects. A renovation often uncovers a condition that predates the work. The policy won’t pay to correct it.
When the transition actually happens
At the front end, the switch should happen before demolition, and it should be written down. The sequence looks like this:
- Tell your current homeowners company the scope, the timeline, and whether you’ll be living there. Get the answer in writing. Some companies will endorse the policy and carry on. Some will require a builders risk. Some won’t want the risk at all.
- Confirm in the construction contract who buys the builders risk, the valuation basis, the limit and the deductible.
- Confirm the existing structure is insured somewhere for its full reconstruction value for the entire duration of the project.
- Confirm everyone with an interest is on the right policy: you, the contractor, the lender, and the trust or entity that holds title if you don’t hold it personally.
Coming off builders risk at the end has its own traps. Occupancy can end a builders risk policy before the work is finished, which catches people out. Moving from builders risk back to homeowners covers that end of it.
Where to go from here
If the project is on an expensive home, the service page for this work is high value home renovation insurance. For the standard market version of the same question, see remodeling your home.
Want somebody to read the construction contract’s insurance article and your current declarations page side by side before the crew shows up? Request a coverage review. It’s the cheapest hour in the whole project.