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16+ years in personal finance and insurance writing
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Licensed auto and home insurance agent
4+ years of experience in insurance and personal finance editing
NPN: 20564519
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Licensed property and casualty insurance agent
NPN: 21630969
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Standard homeowners insurance offers some protection during a home renovation project, but it may not be enough. Your current policy may cover a smaller project, like replacing your kitchen backsplash. But a larger project, like a full kitchen remodel or a home addition, likely requires additional coverage.
In this article, we explore the ins and outs of home renovation insurance, including what it does and doesn’t cover, and how you can fully protect your home during a remodeling project.
A standard homeowners insurance policy may offer some coverage during a renovation, but larger projects often require extra coverage.
Your insurance coverage needs are likely to change during and after a home renovation.
Let your insurer know about the renovation in advance to prevent denied claims or underinsurance issues.
Homeowners insurance generally provides some coverage for home renovation projects, but it depends on the type, scope, and timing of the renovation. Before starting a home renovation, contact your insurance agent to inform them of your plans.
Your insurer might request changes to your policy during renovation, such as conditional replacement cost coverage or an increased deductible.
Large-scale renovations may require additional insurance coverage, such as a builder’s risk policy or higher no-fault medical coverage, to fully protect you. Once the project is complete, you may also need to increase your dwelling coverage to reflect your home’s increased value.[1]
Your home insurance may have some gaps during your home remodeling project. Here are a few to be aware of:
Home vacancy: Standard homeowners insurance applies to owner-occupied homes, so you might need extra coverage if you move out during the remodeling.[2]
Structural changes: Your current policy covers your home’s existing structure but not any structural changes or additions that increase rebuilding costs.
Personal liability: A standard home insurance policy includes liability coverage with relatively low limits. If you’re DIYing your project with the help of some friends, an umbrella policy can increase your liability limits for more protection.
Don’t just assume your insurance fully covers you during construction. Contact your insurer to help determine what additional coverages you need.
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Although policies from the best home insurance companies typically provide some coverage during a home renovation, you may need additional protection. Consider the following:
Builder’s risk insurance — also called course-of-construction insurance — covers structures and materials during a home renovation project. For example, if someone breaks into your home and steals building materials, the coverage would help replace those items and repair the damage.
Additional liability and medical payments coverage can add extra protection if you plan to do some or all of the work yourself. For example, if a friend is injured while helping you with a DIY kitchen remodel, increased no-fault medical payments coverage can help reduce the likelihood of legal action.
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A home renovation can raise your home’s value, which means you’ll need to increase your dwelling coverage limits. Any time you increase coverage, your home insurance costs will also rise.
The building materials used in the remodel could also affect your insurance costs. For example, if you replace the old vinyl floor in your kitchen with a high-end hardwood, it’ll cost more to replace if a covered peril damages it.
In addition, certain home upgrades during a renovation can raise your insurance rates. For example, if you add a swimming pool or water fountain, you’ll need to increase your liability coverage because of the increased risk.[3]
Depending on the type and scale of your renovation project, you might need multiple types of insurance coverage. Homeowners insurance covers some risks, while contractors are responsible for covering others.
The table below breaks down each policy type, who buys it, and what it covers.
Policy Type | Who Buys It | What It Covers | Best For… |
|---|---|---|---|
| Homeowners insurance | Homeowner | Basic dwelling, personal property, and liability coverage | Minor renovations |
| Builder’s risk insurance | Homeowner or contractor | Existing structure, new construction, liability | Moderate to major renovations |
| Contractor insurance | Contractor | Liability, workers’ compensation | Any renovation that uses contractors |
Your current homeowners insurance policy provides some coverage during home renovation projects. If you’re planning a minor renovation or will complete the work yourself, even a cheap homeowners insurance policy may provide all the coverage you need.
But if you have friends or family members helping out, consider increasing your liability limits.
Check your policy limitations by reading your policy documents. Before starting any renovation project, contact your insurer to find out whether you need additional insurance coverage while the work is underway.
A builder’s risk or course-of-construction policy insures the property during home renovation projects on an all-risks basis. A homeowner purchases this type of coverage for a moderate or major home renovation that involves contractors.
Builder’s risk insurance covers damage to your home during construction projects. It can also provide coverage for personal property, liability, and loss of use.
If you hire a contractor for your home renovation, verify that they have general liability insurance. This coverage can help pay for repairs if your contractor damages your home or injures someone during the project.
For example, if a subcontractor or employee accidentally leaves water running in your home and it damages your hardwood floors, the contractor’s insurance would cover repairs. This coverage also applies if your contractor leaves tools lying around and you trip on them and injure yourself.
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If you’re preparing to start a home improvement project, follow these steps first:
Contact your insurer to inform them of the renovation project. Explain the type and scope of work so your agent can identify any coverage gaps.
Consider taking out a builder’s risk policy. You can buy it as an add-on or a stand-alone policy. This type of policy protects your home during construction from weather damage, theft, and vandalism.
Ask to see a copy of your contractor’s policy documents. Your contractor should have both general liability insurance and workers’ compensation insurance. If they won’t show you these documents, consider hiring a different contractor.
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Once your home renovation is complete, contact your insurer and have them reassess your coverage. You might need higher dwelling coverage limits to reflect your home’s new value.
If you purchase new furniture, decor, or electronics for your newly renovated home, you may need higher personal property limits. Keeping receipts or conducting a home inventory helps determine the appropriate amount of coverage.
Knowing the answers to some common home renovation insurance questions can help you prepare to take on this significant project.
It depends. The type and scope of your home renovation project determines whether you need extra insurance. Some examples include builder’s risk insurance, umbrella insurance, and contractor liability insurance.
The cost of home renovation insurance depends on the scope and length of your project. Insurance for a smaller project will likely cost less than insurance for a major project, such as finishing your basement or building an addition.
It might. But while homeowners insurance may cover minor DIY renovations, it’s smart to consider increasing your liability limits if you plan to enlist the help of friends and family.
Yes. A renovation can increase your homeowners insurance premiums if it increases your home’s value. You might also need to increase your personal property insurance limits if you buy new furniture or other items.
Yes. You should always inform your insurer before starting a home renovation. Your insurer can check your current coverage and advise you on any additional coverage or policies you might need.
Your contractor’s insurance covers bodily injury and property damage liability during remodeling projects. But you’ll still need your homeowners insurance for full protection.[4]
The 30% rule states that homeowners shouldn’t spend more than 30% of their home’s current market value on a home renovation. This means if your home is worth $300,000, it’s wise to cap your renovation budget at $90,000.
)
16+ years in personal finance and insurance writing
Certified Financial Education Instructor
Licensed auto and home insurance agent
4+ years of experience in insurance and personal finance editing
NPN: 20564519
Licensed property and casualty insurance agent
NPN: 21630969
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