Most homeowners spend months planning a renovation. The layout, the materials, the contractor. Insurance is almost always an afterthought, and that gap can turn an expensive project into a financial disaster.
Here is what builders risk insurance actually is, what it costs for a renovation, and why the timing of when you get it matters more than most people realize.
Your Homeowners Policy Does Not Cover You During Construction
This surprises a lot of people. Standard homeowners insurance is built for a finished, occupied home. The moment you start knocking down walls or pulling permits, your insurer may classify the property differently, and certain types of damage that happen during the build may simply not be covered.
Builders risk insurance, sometimes called course of construction insurance, fills that gap. It is a temporary policy that activates when construction begins and covers the property specifically during the renovation period. Most lenders actually require it before releasing funds for a construction loan, so if you are financing the project, you will likely need it anyway.
What It Covers
The policy protects the structure and materials while work is actively happening. That includes:
- Fire and smoke damage
- Theft of materials and equipment on site
- Vandalism
- Wind, hail, and storm damage
- Lightning
Coverage also extends to materials in transit and stored off-site, not just what is sitting on your job site on a given day. Some policies can be extended to cover soft costs if a covered loss delays your project, things like additional loan interest or lost rental income while the timeline stretches out.
Coverage typically begins on the date all contracts are signed, so do not wait until demolition starts to get the policy in place.
What It Does Not Cover
The exclusions matter just as much as the coverage. Standard builders risk policies do not cover:
- Flood damage (needs a separate flood policy)
- Earthquake damage (needs a separate endorsement)
- Worker injuries or contractor liability (that falls under the contractor’s own general liability and workers comp)
- Faulty workmanship or design errors
- Employee theft
- Normal wear and tear
If your property is in a flood zone, get that conversation out of the way before construction starts. It is one of the most common gaps homeowners find out about after something has already gone wrong.
What a Renovation Actually Costs to Insure
The figures you find online are often wrong, which is part of why people get surprised by quotes. For renovation and rehab projects, rates typically run around 65 cents per $100,000 of completed project value. Renovation work is priced higher than new construction because working inside an existing structure carries more risk, and remodeling projects can run up to 50% more expensive to insure than a ground-up build.
In practical numbers: a $200,000 renovation runs approximately $1,300 for the policy period. A $400,000 project runs around $2,600. Most policies start at a minimum premium of around $700 for twelve months.
A few things that move the price up or down:
- Scope of work – A full gut renovation costs more to insure than a kitchen update.
- Materials – Wood frame construction increases premiums by around 10 to 15%. Fire-resistant materials can bring costs down.
- Location – Coastal and storm-prone areas are rated higher than inland projects.
- Project length – Policies run 3, 6, or 12 months. If your project runs long, extensions add to the total cost.
- Optional coverages – Adding flood or earthquake protection raises premiums by roughly 5 to 10%.
The Transition Back to Homeowners Insurance
This is the part most people skip over and it is worth paying attention to. Builders risk coverage ends when the renovation is complete, typically when your local municipality issues a certificate of occupancy. At that point the policy is done and your standard homeowners coverage needs to take over.
If that transition is not coordinated in advance, there is a window where your property could be sitting without active coverage. Get your homeowners policy updated and ready to activate before the final inspection, not after. One other thing worth knowing: filing a claim on a builders risk policy is separate from your homeowners policy, so it will not drive up your homeowners premium.
For homeowners looking for builders’ risk coverage with fast turnaround and competitive pricing, Farmer Brown Insurance specializes in construction-related coverage and offers instant quotes for renovation projects across all 50 states.
Sort the Insurance Out Early
The renovation planning process has a lot of moving parts. Insurance should not be the last one. Get the policy in place before work begins, know what it does and does not cover, and have the transition back to your homeowners policy already mapped out before the last contractor walks off the job.
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