Compare home renovation insurance

What home insurance coverage do I need for renovations?

The type of home insurance coverage you need depends on the scope of your project and whether you hire a contractor or not. Types of home renovation insurance to consider:

1. Dwelling under construction

Many home insurance companies offer a dwelling under construction add-on to make buying the right insurance for a renovation simple and convenient. This coverage offers the same protection as builder’s risk insurance — insuring your construction project from fire, weather or theft damage.

Some insurers add extras like foundation protection in case of construction-related damage. If your insurer doesn’t offer dwelling under construction coverage, you’ll need to compare builders risk insurance with a separate company.

How it works

This coverage pays out for damage to the construction project, including theft of materials or machinery. It works alongside your home insurance policy to protect your home from fire and storm damage as well.

You can add this endorsement after you’ve bought your current home insurance. You may need to up your home’s dwelling coverage limits if your renovation increases your home’s value.

2. Builder’s risk insurance

If you’re doing major renovations like redesigning the layout of multiple rooms or adding rooms, you may need builder’s risk insurance. Before buying, speak with your home insurance company to see whether your project is covered by your normal policy.

Builder’s risk insurance works alongside your home policy to protect your home from fire, weather or theft damage.

However, the specifics of which policy will cover which types of damage can vary based on the project, the situation and insurance company. Buying dwelling under construction coverage with your current home insurer can help you avoid delays during the claims process.

How it works

A builder’s risk policy pays out for theft, fire or damage to the construction itself. Many policies also pay for theft or damage to materials or machinery while they’re off-site or in transport to your home.

Many insurers customize builder’s risk policies with extensions to cover the type of project as well in case your home contains unique equipment that isn’t normally covered, like scaffolding.

3. Contractor’s liability insurance

When you’re hiring a contractor to renovate, you’ll want to see their business insurance coverage. Look for:

• Contractor’s general liability. See that the contractor’s and any subcontractors’ liability insurance covers property damage, including for completed construction projects. This helps you recoup from damage that happens even years later if the damage is related to faulty workmanship.
• Automobile liability. If your project involves heavy machinery, make sure your contractor includes vehicle liability to pay for injuries caused by this equipment.
• Workers compensation. Make sure your contractor carries workers comp so that you’re not left liable for employee injuries while they’re on the job.

4. Standard dwelling coverage

Your standard home insurance typically won’t pay out if you damage your home during a DIY renovation. This is because most policies have a workmanship exclusion — so it won’t pay for damage to your home if it’s related to faulty workmanship.

If you try installing your own plumbing but a pipe bursts later, your home policy may not cover the pipe and water damage if your insurer can tell it was caused by faulty workmanship.

Check with your insurer to make sure your project is considered low risk and is covered by your policy. If there’s risk of workmanship damage, you might hire a contractor who has liability insurance.

5. Personal liability coverage

This liability coverage pays for court and legal defense costs as well as any settlements if someone sues you for damaging their property or injuring them. If you’re rounding up friends for a DIY job, you may want to up your liability limits.

6. Medical payments coverage

Medical payments coverage can pay for someone’s medical bills if they’re injured on your property, such as for a friend’s broken ankle after they tripped on your stairs.

This coverage can bypass going to court for small claims, though it typically offers low maximum payouts like $1,000 or $2,000. Many insurers include medical payments in your policy.

Do I need home renovation insurance?

Whether or not you need extra home renovation coverage depends on whether renovating adds extra risks for damaging your home. You may not need additional insurance for minor renovations like painting or repairing drywall that you’re doing yourself.

To be sure about your protection, your insurance agent can help you decide if you need extra coverage.

When is home renovation insurance worth it?

Buying home renovation insurance to ensure your project is covered while in progress is worth the extra time and cost. If you or a contractor bursts a water pipe or causes a fire, you’ll have peace of mind knowing the cost of repairing your home is covered.

Plus, asking your contractor about their insurance policy doesn’t cost you anything. If you find out your contractor isn’t properly licensed or insured, opt to hire a contractor who is.

What coverage do I need for building a new home?

You typically need builder’s risk insurance if you’re building a new house on land that you own or if you become the homeowner before it’s built.

But if you won’t own your home until after it’s built, which is usually the case, the insurance is your builder’s responsibility. If you’re in doubt, check with your home insurance agent about your specific situation.

How it works

Since you’re building a home from the ground up, your builder’s risk policy should pay for theft, fire or storm damage even if your home is a total loss.

In this case, your policy takes the place of your home insurance until the construction is completed. In some cases, the policy doesn’t end until you take possession or move into the house.

Did you know? Builders and building owners can buy builder’s risk insurance.

Many times, builders and contractors buy builder’s risk policies if they own the building or are otherwise responsible for damage that’s covered by this policy.

However, building owners may buy this policy if they own the home or land or if their building contract makes insurance their responsibility. Builder’s risk policies typically are customized to the building project to meet any specific needs.

What should I watch out for?

Check on a few details before you start modifying or adding on to your home:

• Uninsured contractors. Hiring contractors who don’t have the proper insurance could leave you vulnerable if your home gets damaged.
• Local building codes and permits. Check on the local building codes or permits you might need if you’re doing renovations yourself. Otherwise, you might be required to bring your home up to code during future repairs or when selling your home.
• Assuming a renovation is covered by your insurance. Some projects may leave you uninsured for certain types of damage, leaving you to unexpectedly shell out for repairs.

Bottom line

Refreshing your home’s look or building your dream home could mean that you need a special type of home insurance or add-on coverage.

Since your needs vary based on the scope of your project, you might tell all your renovation details to your home insurance agent. They’ll let you know what home insurance coverage you need or whether you should compare builder’s risk policies for your major project.