You have been planning this renovation for months. Maybe it is a kitchen gut-and-rebuild, a second-story addition, or a full basement finish. The contractor is lined up, permits are pulled, and you are ready to go. But have you called your insurance agent?
Most homeowners do not think about insurance when they start a renovation, and that is a mistake that can cost thousands. Renovations change your home's value, create new risks, and can even void parts of your coverage if your insurer does not know about them. This guide covers exactly what you need to do — before, during, and after your renovation — to make sure you are properly protected.
Tell Your Agent Before You Start
This is the single most important piece of advice in this article: call your insurance agent before construction begins. Here is why.
Your home insurance policy is based on certain assumptions about your property — its value, its condition, and its use. A renovation changes all three. If you do not notify your insurer and something goes wrong during construction, your claim could be denied or reduced because the policy did not account for the renovation.
The call takes five minutes. Tell your agent what you are doing, the estimated cost, the timeline, and whether you will be living in the home during construction. Your agent will adjust your coverage accordingly.
Increased Dwelling Coverage
The most immediate insurance change during a renovation is to your dwelling coverage limit. Your dwelling coverage (Coverage A on your policy) is the maximum amount your insurer will pay to rebuild your home. When you add a $75,000 kitchen renovation or a $120,000 addition, your home's replacement cost increases by that amount.
If you do not increase your dwelling coverage to reflect the renovation, you could be underinsured. In the event of a total loss, your payout would fall short of what it actually costs to rebuild your now-improved home.
Most carriers allow you to increase dwelling coverage mid-term with a small premium adjustment. Some policies include an "inflation guard" or "extended replacement cost" endorsement that adds a 25% to 50% buffer above your stated dwelling limit, but you should not rely on that buffer alone for a major renovation.
Builder's Risk Coverage
During construction, your home faces risks it normally does not: open walls exposed to weather, construction materials stored on-site, workers coming and going, and potential for fire from welding, soldering, or electrical work. Standard homeowner's policies were not designed for construction zones.
Builder's risk insurance (also called "course of construction" coverage) is a specialized policy that covers damage to the structure, building materials, and fixtures during the renovation. It typically covers:
- Fire, lightning, and explosion
- Wind, hail, and storm damage
- Theft of building materials
- Vandalism
- Water damage (in some policies)
For smaller renovations under $50,000, your existing homeowner's policy may provide sufficient coverage with a dwelling increase. For larger projects — especially additions, structural changes, or renovations that expose your home to the elements — a separate builder's risk policy is recommended.
Builder's risk policies are typically short-term (3 to 12 months) and cost 1% to 5% of the construction budget. On a $100,000 renovation, expect to pay $1,000 to $5,000 for the policy term.
Liability During Construction
Renovations bring workers, subcontractors, and sometimes heavy equipment onto your property. This creates liability exposure. If a delivery driver trips on construction debris in your driveway, or if a neighbor's property is damaged by your renovation, your liability coverage needs to be adequate.
Contractor's Insurance
Before work begins, verify that your general contractor carries their own insurance, including general liability and workers' compensation. Request a certificate of insurance and make sure the coverage is current. If a worker is injured on your property and the contractor does not have workers' comp, you could be on the hook.
Your Liability Coverage
Review your personal liability limit (Coverage E). Most homeowner's policies start at $100,000, but during a renovation, higher limits are worth considering. You can also add an umbrella policy for broader protection — a $1 million umbrella policy typically costs $200 to $400 per year.
The Vacancy Problem
If your renovation is extensive enough that you need to move out during construction, be very careful. Most homeowner's policies include a vacancy clause that restricts or eliminates certain coverage if the home is vacant for more than 30 to 60 consecutive days.
Specifically, vacancy clauses often exclude coverage for vandalism, theft, water damage, and glass breakage. Some carriers reduce all claim payments by 15% during vacancy periods. This is a major issue for homeowners who move out for a three- to six-month renovation.
If you plan to vacate during construction, tell your agent immediately. They can add a vacancy permit endorsement to your policy, which maintains full coverage during the vacancy period. Some carriers include this automatically for renovations; others require it as a paid endorsement.
Permits and Code Compliance
Pulling proper permits is not just a legal requirement — it can affect your insurance coverage. If you perform unpermitted work and later file a claim related to that work, your carrier may deny the claim.
Additionally, if your renovation triggers code upgrade requirements (bringing electrical or plumbing up to current code), your policy's "ordinance or law" coverage kicks in. This coverage pays the additional cost of rebuilding to current code after a covered loss. Make sure you have this endorsement — if you do not, you could be responsible for code upgrade costs out of pocket.
After the Renovation: Update Your Policy
Once the renovation is complete, do not forget to circle back with your agent. This is when you finalize your updated dwelling coverage, remove any temporary builder's risk policy, and potentially unlock new discounts.
Yes, renovations can actually lower your premium in some cases. A new roof, updated electrical, new plumbing, or a modernized kitchen can qualify for renovation discounts and may reduce your risk profile. Your agent should re-rate your policy after the renovation to capture any savings.
Renovation Insurance Checklist
| Action Item | When | Why It Matters |
|---|---|---|
| Notify your insurance agent | Before construction starts | Prevents coverage gaps and claim denials |
| Increase dwelling coverage | Before construction starts | Covers increased home value during and after |
| Consider builder's risk policy | Before construction starts | Covers construction-specific risks |
| Verify contractor's insurance | Before signing contract | Protects you from worker injury liability |
| Review liability limits | Before construction starts | Extra people on property = extra risk |
| Add vacancy permit (if moving out) | Before vacating | Prevents loss of coverage during vacancy |
| Pull proper permits | Before construction starts | Unpermitted work can void claims |
| Check ordinance/law coverage | Before construction starts | Covers code upgrade costs after a loss |
| Update dwelling coverage | After renovation complete | Reflects final improved value |
| Ask about renovation discounts | After renovation complete | New systems may lower your premium |
| Cancel builder's risk policy | After renovation complete | No longer needed; stop paying premium |
Common Renovation Insurance Mistakes
Not Telling Your Insurer
This is by far the most common mistake. Homeowners assume their existing policy covers everything. It might — for small cosmetic updates. But for any renovation that changes your home's value or structure, your insurer needs to know.
Relying on the Contractor's Insurance Alone
Your contractor's policy covers their liability and their workers. It does not cover damage to your home during construction. You need your own coverage in place.
Forgetting to Update After Completion
Some homeowners notify their agent before the renovation but forget to finalize the coverage update afterward. This can leave you underinsured — or paying for a builder's risk policy you no longer need.
Skipping Permits to Save Money
The few hundred dollars you save by skipping permits can cost you tens of thousands if a claim is denied because the work was unpermitted. It is never worth the risk.
How Better Choice Helps During Renovations
At Better Choice Insurance Group, we walk our clients through the entire renovation insurance process. When you tell us about an upcoming project, we review your current coverage, recommend adjustments, and help you decide whether a builder's risk policy makes sense for your specific situation.
Because we work with 22+ carriers, we can also shop your updated policy after the renovation to make sure you are getting the best rate for your improved home. A renovation that adds value can also change which carrier prices your home most competitively.
Planning a renovation? Get a free coverage review from Better Choice Insurance Group before you break ground. We will make sure your coverage matches your project and your budget. Call us at (847) 908-5665 or start your quote online.