Renovation Insurance for Homeowners: What to Know Before You Build

Discover how home renovation insurance can protect people and property while preventing risks and cost overruns.
Key takeaways:
- Home renovation insurance is essential for staying on budget during renovations.
- This coverage is a good way to protect against renovation-specific dangers
- Several types of insurance may apply during a renovation, some of which fall on the contractor and others on the homeowner
Home renovation can be exciting, but it becomes much harder without the right insurance coverage. Securing this protection before renovations begin can mean the difference between an on-budget project and a financial disaster.
HomeAdvisor sets the average home renovation cost at $52,254, so it pays to be as financially careful as possible; especially when even low-end projects cost more than $19,000.
Neglecting renovation insurance for homeowners is a common mistake, but a critical thing to remember. These plans can cover issues involving contractors, materials, and liability to protect a property and the homeowners themselves from cost overruns and expenses of many kinds.
What Is Home Renovation Coverage and Why Do You Need It?
Renovation insurance for homeowners differs from standard homeowners insurance. It’s designed to address the particular risks involved in home renovation and cushion any unexpected financial outlays that arise.
That’s why relying on a standard policy to protect you is a bad idea, as standard policies often exclude renovation-related risks.
For example, if you attempt complex DIY work, your homeowners policy may not cover the resulting damage.. Likewise, standard policies won’t cover inadequate or faulty workmanship by contractors.
Here are some other common risks which home renovation coverage can cover:
Fire
The NFPA explains how renovation can literally open the door to fire by bringing flammable materials into the structure, or or trigger fires through electrical components or flammable materials. Sprinklers may also be turned off during renovation work, further increasing fire risk.
Theft
Renovations can bring strangers into your home, both invited (work crews) and uninvited who may enter through unsecured doors and windows. This can leave your possessions vulnerable for the duration of the project, especially if you’ve had to vacate the home.
Accidents
Construction materials, tools, lack of PPE, or electrical hazards; there’s a long list of things that can go wrong with home renovations and result in physical harm.
Structural damage
A lack of proper research, planning, and patience can lead to costly structural damage. Home renovation is delicate work which can often uncover unknown structural issues as work progresses which must be resolved safely and promptly.
Renovation insurance for homeowners can help cover these things, but the next key issue is knowing exactly what’s covered.
Types of Insurance That May Apply During a Renovation
Home renovation coverage has a few different aspects on closer inspection:
General liability insurance
This covers homeowners against third-party injuries and property damage. This includes contractors, delivery personnel, or visitors who are injured on-site.
Contractor’s Insurance
Always request a certificate of active insurance from all contractors working on your renovation. Ideally, you would skip those companies who don’t provide you with one because you could be held financially responsible to pay their medical bills or potential lawsuits resulting from injury on your project.
Builder’s Risk Insurance
This comprehensive coverage is solely the responsibility of the homeowner and protects them in several ways. It covers damage to the physical property along with provisions against theft of materials and other items, and can sometimes be extended beyond the project area to cover the entire property.
Renovation insurance for homeowners can be further extended by policy riders for greater risk coverage. Adding an umbrella policy is a good way to significantly increase the amount that can be paid out to protect you.
Coverage Gaps to Watch Out For
Homeowners must examine home renovation insurance for gaps that might cost them. Policies should be tailored to the specific risks of your renovation project.
For example, materials may have to be stored off site and require transit, leaving them vulnerable to damage and theft. These can be covered by Builder’s Risk insurance. And as we mentioned above, the work done by uninsured subcontractors is most effectively avoided by not hiring them.
Clarify the scope of work before purchasing coverage. Does your renovation involve structural changes like removing/replacing load bearing elements, or are the changes more related to electrical, plumbing, or carpentry work?
Lastly, construction work can allow mold, water, or weather-related damage to occur. Keeping a well-ventilated workspace while using temperature monitors, humidity gauges, and actively cleaning up any moisture sources can prevent these issues becoming a problem.
Why Insurance Wins Against Disasters Every Time
There’s no shortage of home renovation horror stories out there. From minor contractor errors like the wrong ceiling texture setting a project back weeks, to poorly-researched wood panelling work that deluged the owners in two floor’s worth of old insulation, the list goes on and on.
It’s safe to say anyone with a similar tale will wish they’d had renovation insurance in place. Renovations almost always involve unpredictability, but proper insurance ensures you’re not left exposed. You just need to know the right questions to ask to get the proper coverage.
How to Get the Right Renovation Insurance
It’s vital to discuss any renovation plans with your insurer before work begins. Provide them with comprehensive information like architectural plans and permits, and ask key questions like:
- What coverage will I need?
- What’s my current deductible, and can I raise or lower it?
- Am I eligible for any home renovation discounts?
- What if my renovation damages a neighbor’s property?
- How do I file a claim?
It may also be necessary to update your homeowners plan following a renovation, depending on its scope. A larger house can affect your premiums by adding square footage and potentially increasing its risk profile. This will also affect your home’s value making it useful to know how that extra square footage impacts resale.
Always keep in mind to only work with licensed general contractors to avoid liability gaps. Get a contractor’s active Certificate of Insurance (COI) to know what coverage they have and what you’ll need to cover on your end. Comprehensive home renovation insurance is a two-way street where contractors and homeowners both play their part.
Don’t Build Without a Safety Net
Renovation insurance is essential to protect your investment. Acting before work begins is the best way to protect yourself, your property, and your planned budget.
Don’t leave your investment vulnerable when planning a home renovation. Contact RPC General Contractors for trusted crews and insurance-ready project planning. We’ll use our decades of construction experience to ensure your project is protected from day one.