When a homeowner signs on for a gut renovation or a major addition, one of the first assumptions is often: “My homeowner’s insurance has me covered.” It’s a reasonable assumption, but in most cases, it’s wrong.
Standard homeowner policies are built for finished, occupied homes. They aren’t designed to handle the exposures of active construction: structural changes, materials on-site, an unoccupied property, or the liability associated with crews working around an existing structure. For remodeling contractors and high-end flippers, this knowledge gap creates real risk.
| Here, we break down what builders insurance covers, why homeowner policies fall short during renovation, and how the right construction insurance protects everyone with a stake in the project. |
What Builders Insurance Truly Includes
Builders insurance, often referred to as builders risk insurance or course of construction insurance, is a specific type of property policy designed to safeguard a building during its construction phase. A building under construction has an ever-increasing value as more of it is completed, which is why a dedicated builders risk policy exists to cover that value in case of a loss.
A standard builders insurance policy typically covers:
- The existing structure and the new work being added
- Building materials and supplies, both on-site and in transit
- Damage from fire, wind, hail, lightning, vandalism, and theft
- Temporary structures used during the build
- Soft costs, such as permit fees and architect expenses, caused by a covered loss
Policy terms are generally available in increments of three, six, nine, or twelve months depending on project scope.
Why a Homeowner’s Policy Is Not Enough
This is the misconception that creates the most risk on job sites. The Insurance Information Institute advises contacting your insurance agent before a renovation begins, noting that waiting until work is underway could leave you dangerously underinsured, and that an unreported renovation can create grounds for a denied claim.
A homeowner’s policy is unlikely to cover newly framed walls, materials stored on-site, or damage to work in progress. Builders risk coverage addresses that gap by safeguarding a home from damages that occur during construction, including issues like wind and rain, theft of materials such as carpeting or lumber, and vandalism.
High-end flippers know that a vacant property under active renovation is among the higher-risk scenarios in real estate, and many homeowners’ policies exclude coverage when a home has been unoccupied for an extended period.
Liability Insurance for Builders: The Other Side of the Equation
Property coverage is one piece of the puzzle. The other is liability. Considering the potential for a lawsuit if someone alleges harm due to construction activities, contractors will almost always require liability insurance.
A contractor’s general liability policy does not replace dedicated property damage protection for new construction. Both are part of a sound construction risk management approach. The Insurance Information Institute also recommends verifying the insurance coverage of both contractors and subcontractors before work begins, since gaps in their coverage may need to be addressed separately.
Many lenders will not release funds for a construction project without proof of large-scale renovation coverage, and some municipalities require proof of builders insurance before issuing a building permit.
Concerning Workers’ Compensation
Workers’ compensation insurance is separate from builders insurance and offers protection for medical expenses and lost wages for employees injured while carrying out their responsibilities.
Contractors operating in Virginia should confirm their specific obligations with an insurance professional.
Build the Right Coverage Before You Break Ground
Every large renovation has an essential window between when work begins and when it’s finished, and that’s when exposure is highest. Materials can be stolen. Fires start. Storms don’t wait for certificate-of-occupancy day.
OSHA data consistently shows construction among the industries with the highest rates of worker injury, reflecting how much can go wrong on an active job site even under experienced supervision.
Before breaking ground, confirm with an insurance professional that a builders insurance policy covers the scope of work, the value of the existing structure, and the materials involved. And coordinate between the contractor’s existing commercial coverage and the property owner’s policy to make sure nothing falls through the gaps.
Protect Your Next Project with Burton & Company
Burton & Company has been serving Virginia contractors, flippers, and property owners for over 100 years. Our team can help identify coverage gaps and put together a home renovation insurance policy that fits the project. No unnecessary add-ons, just the right protection for the work you’re doing.
Call (888) 652-1046 or contact us online to connect with an insurance professional who understands construction risk management in Virginia.
