There are standard questions that we ask of property owners who are planning a renovation, remodel, or full rehab project. We created this explanation to help you understand when your regular property insurance may not be enough and when you may need special coverage during construction.
A renovation can change the risk of a property. Walls may be opened. Electrical, plumbing, or roofing work may be underway. Contractors may be coming in and out. The home may be vacant for weeks or months. Materials may be stored on-site before they are installed. All of these details matter to an insurance company.
Here are the basic things to review before beginning a rehab project:
Type of Property
Are you renovating a single-family home, condominium, townhome, duplex, apartment building, rental property, commercial building, or HOA-owned structure?
The type of property affects the kind of insurance that may be needed. A homeowner fixing a kitchen will have different coverage needs than an investor rehabbing a vacant rental unit or an association repairing common areas.
Scope of Renovation
A small cosmetic project may not require the same insurance changes as a major structural rehab.
Painting, flooring, cabinet replacement, or appliance updates may be simple. However, removing walls, replacing the roof, adding rooms, changing plumbing, updating electrical systems, or rebuilding after damage can create a larger exposure. The more the project changes the structure, the more important it is to review your policy before work begins.
Occupancy During the Project
Will anyone live in the property while the work is being completed?
Many insurance policies treat an occupied home differently from a vacant or unoccupied property. If the property will be empty for an extended period, the carrier may need to know. A vacant home can be more exposed to theft, vandalism, water damage, fire, and unnoticed maintenance problems.
Do not assume that the same homeowners or property policy will continue to respond the same way if the building is vacant during rehab.
Builders Risk Insurance
Builders risk insurance is a special type of coverage for property that is under construction, renovation, or improvement.
This coverage may help protect the structure, building materials, and certain construction-related property while the project is in progress. It is often considered for larger remodels, additions, gut rehabs, and major restoration work.
A builders risk policy is not the same as a standard homeowners policy. It is designed for the construction phase, when the property may not look or function like a finished home.
Vacant Property Insurance
If the property is empty before, during, or after renovation, vacant property insurance may be needed.
A vacant property may not have furniture, regular activity, or daily supervision. These factors can affect how a claim is handled. For example, a small water leak can become a major loss if no one notices it for several days.
If you purchased a property specifically to rehab and resell or rent out, ask whether your current policy allows for vacancy and renovation work.
Contractor Insurance
Before hiring a contractor, ask for proof of insurance.
A contractor should generally carry general liability insurance and, if they have employees, workers’ compensation insurance. You may also want to confirm whether subcontractors are covered.
This is important because accidents can happen on a job site. A worker may be injured. A neighbor’s property may be damaged. A contractor may cause accidental damage to your building. You want to know whose policy responds before there is a problem.
Permits and Code Requirements
Some renovation projects require permits, inspections, and compliance with local building codes.
Insurance companies may ask whether permitted work is being performed. They may also want to know if licensed contractors are being used. Unpermitted work can create problems later, especially if a claim involves electrical, plumbing, structural, or roofing repairs.
If your project includes major systems, ask your contractor what permits are required and keep copies for your records.
Materials Stored On-Site
Renovation projects often include materials that are delivered before they are installed.
This may include flooring, cabinets, windows, appliances, lumber, fixtures, tile, or HVAC equipment. If these items are stolen, damaged by weather, or destroyed in a fire, coverage will depend on the policy language.
Ask whether building materials are covered while they are on the premises, in transit, or temporarily stored somewhere else.
Theft and Vandalism Risk
A property under rehab can attract attention.
Tools, copper wiring, appliances, and construction materials may be targets for theft. Vacant or partially open properties may also be more vulnerable to vandalism.
You may reduce this risk with secure locks, lighting, cameras, fencing, alarm systems, and regular site visits. These details may also help your insurance agent understand how the property is being protected.
Fire and Water Damage
Renovation work can increase the chance of fire or water damage.
Electrical updates, welding, temporary heating, plumbing changes, open walls, and roof work can all create risk. A pipe may be disconnected. A temporary tarp may fail. A worker may leave combustible materials too close to a heat source.
Before work starts, ask your insurance agent how fire and water damage are handled during renovation.
Liability During Rehab
Your liability exposure may increase when people are working on or visiting the property.
Contractors, inspectors, delivery drivers, neighbors, tenants, buyers, and real estate agents may be around the premises. If someone is injured, there may be a claim.
Ask about the liability limit on your policy. You may also want to discuss whether an umbrella policy is appropriate, especially if the property has multiple visitors, shared spaces, or higher-risk features.
Change in Replacement Cost
A renovation can increase the value and replacement cost of the property.
If you add square footage, upgrade materials, finish a basement, replace major systems, or improve the structure, the old insurance limit may no longer be enough. The cost to rebuild after the renovation may be higher than it was before the project began.
Once the work is complete, review your dwelling limit or building limit so the policy reflects the improved property.
Rental Property Rehabs
If you are rehabbing a rental property, the insurance conversation may be different from a personal residence.
You may need to discuss landlord insurance, vacant property coverage, builders risk coverage, loss of rental income, liability, and coverage for appliances or owner-owned contents.
If tenants will remain in the property during the work, that should also be discussed. The risk is different when people are living in the building while repairs are taking place.
Condo and Townhome Renovations
If you own a condo or townhome, you should review both your personal policy and the association’s master policy.
The association may insure certain parts of the building, while you may be responsible for interior improvements, betterments, personal property, and liability. Before renovating, ask where the association’s responsibility ends and yours begins.
You may also need approval from the association before beginning work.
HOA and Multifamily Projects
For HOA boards and multifamily property owners, rehab projects can involve shared spaces, common elements, roofs, siding, parking lots, clubhouses, pools, and other community property.
The board or property owner should review the association or commercial property policy before signing contracts. General liability, workers’ compensation, directors and officers coverage, umbrella limits, and contractor requirements may all be part of the conversation.
Large projects should be reviewed carefully so that coverage is aligned with the contract, timeline, and property exposure.
Documentation to Keep
Good records can help if there is a claim.
Keep copies of contractor agreements, certificates of insurance, permits, invoices, receipts, photos, inspection reports, and change orders. Take photos before, during, and after the project.
If materials are delivered to the property, keep receipts and delivery confirmations. If the project changes in cost or scope, tell your insurance agent.
When to Call Your Insurance Agent
Call your insurance agent before the renovation begins.
You should also call if the project becomes larger than expected, the property becomes vacant, the completion date changes, you switch contractors, you add square footage, or you increase the value of the property with major upgrades.
It is better to ask questions before a claim happens than to discover after a loss that the policy did not match the project.
Questions to Ask Before Rehab Starts
Here are some helpful questions to ask:
Does my current policy allow renovation work?
Is the property covered if it is vacant or unoccupied?
Do I need builders risk insurance?
Are materials covered before they are installed?
What insurance should my contractor carry?
Will liability coverage apply during the project?
Should I increase my dwelling or building limit after the renovation?
Do I need flood, sewer backup, umbrella, or other supplemental coverage?
Quick Answers About Renovation Insurance
Do I need special insurance for a home renovation?
You may need special coverage if the project is large, structural, expensive, or if the property will be vacant during the work.
What insurance covers a house during rehab?
Depending on the project, coverage may include builders risk insurance, vacant property insurance, landlord insurance, or adjustments to an existing homeowners policy.
Does homeowners insurance cover renovations?
Some smaller projects may be covered, but major renovations should be reviewed with your insurance agent before work begins.
When should I call my insurance agent about a renovation?
Call before the project starts, especially if contractors will be working on-site, the home will be vacant, or the renovation changes the replacement cost of the property.
Final Thoughts
Renovations can improve a property, increase its value, and make it more useful. They can also create temporary risks that a standard insurance policy may not fully address.
Before beginning a rehab, speak with an insurance professional about the property type, occupancy status, projaect cost, contractor details, and expected timeline.
At StarNet Insurance Group, we’re here to help you navigate the complexities of insurance. Please feel free to contact us with any questions you may have.
