Understanding Builder’s Risk / Renovations Policies

Image by Jossué Trejo from Pixabay

Over the last year or so we’ve done posts on insuring your home, mobile home and even a vacant home. We’ve discussed binding restrictions and scheduled personal property as well as policy deductibles, endorsements and possible discounts.

One thing we haven’t discussed is a Builder’s Risk and/or Builder’s Risk Renovations policy.

If you’ve been talking to a bank or mortgage company about financing the construction of your home, you may have been told you’ll need a Builder’s Risk policy and wondered what in the world that is.

We’re here to help!
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A Builder’s Risk policy is insurance to cover the materials, fixtures and equipment while the home (or business) is under construction.

Some items covered would be lumber, roofing material, doors and windows, etc. Many policies also offer vandalism and malicious mischief as well as theft coverage should something like this occur. Flood, as a separate policy, may or may not be available. A builder’s risk policy is usually good for up to 1 year and renewal may or may not be an option, therefore, it is important that your contractor, insurance company and mortgage company are on the same page for the time-frame a home or business is under construction.

The policy does not automatically morph into regular home insurance once construction is complete, instead it expires, after which you need to get a traditional home insurance policy.

Now that you have a basic understanding of a traditional builder’s risk policy, let’s talk about a Builder’s Risk Renovations policy….

A Builder’s Risk Renovations policy covers the dwelling or structure while it is being remodeled, renovated, and/or repaired. Often a mortgage company will require this type of coverage when the home that is financed needs extensive repairs that are not covered under a home insurance claim, when a loan is required to cover repair costs, when borrowing money to remodel or renovate OR in the instance of damage to a home where insurance was not in place (EX:  flood damage where no flood insurance was in place).

Whereas a traditional home insurance policy covers structure, contents and liability, a Renovations policy covers the structure only (NO contents/personal property!). Some may include property liability but don’t assume this is true. You may need to purchase a separate GL policy and/or check with your contractor–if he is licensed and bonded, chances are he will have a GL policy that protects against a liability claim while the work is underway. This in no way indicates you shouldn't protect yourself with a GL policy, only that a licensed/bonded contractor usually has one. As with any other home insurance policy, flood is normally not covered on a renovations policy.

These are just a few basic explanations of a Builder’s Risk and Builder’s Risk Renovations policy. If you’re in need of one of these policies, give us a call. We’re happy to assist in providing the type of coverage you need.

Until next time take care and remember….A home is one of your greatest assets, don’t go a day without protection!

Tommy Curtis and Staff