Renovations, Flips, and New Builds: Property Insurance Strategies for Every Stage of Construction

Starting a renovation, flipping a house, or building from the ground up changes the insurance landscape for any property owner. Ordinary homeowners insurance was designed for a stable, occupied dwelling — not a site with subcontractors, stored materials, open walls, and transient occupancy. Without the right coverage at the right time, you can face gaps that leave physical assets, project profits, and liability exposures unprotected. This article walks through the practical insurance choices and risk-management strategies for each project stage: pre-construction, active construction or renovation, short-term flips, and post-completion occupancy. You’ll get clear explanations of policy types, key coverage features, underwriting expectations, claim handling tips, and a short checklist to prepare before you break ground or swing a hammer.

Why insurance matters during renovation and construction

Construction and major renovations increase both the probability and severity of losses. Exposed structures invite weather damage; stored materials create theft and water-loss opportunities; heavy equipment can damage adjacent property; and tradespeople working on site raise liability risks. In addition, lenders often require specific insurance types and limits during construction. Insufficient coverage can lead to denied claims, out-of-pocket repair costs, interruptions that cancel project timelines, and legal fights over responsibility.

Beyond physical loss, projects have financial and reputational risks: delays can erode profits on flips, loss of rental income affects investors, and safety incidents can trigger lawsuits that outstrip basic liability limits. Insurance is not a magic bullet, but the right combination of policies, endorsements, and contractual protections (like requiring certificates of insurance from contractors) mitigates most of these exposures.

Key policy types you’ll encounter

Several policy types and endorsements matter in construction and renovation contexts. Here are the main ones to know:

Builders Risk Insurance

Builders risk is a short-term property policy that covers buildings, materials, and sometimes equipment while construction is in progress. It is typically written on an “all risk” basis (open perils) for the project period. Builders risk can be purchased by homeowners, developers, contractors, or lenders and is usually issued for a fixed term (e.g., the expected build time plus a testing/completion period).

Homeowners Insurance (HO Policies)

Standard homeowner policies (HO-3, HO-5, etc.) are designed for occupied residences. Minor renovations are often covered under an HO policy, but extensive projects can void coverage or trigger restrictions — especially when the property becomes vacant or when any portion of the structural work is removed. Homeowners should notify their insurer before a major renovation; the insurer will advise whether the HO policy continues to apply and whether endorsements or a builders risk policy are required.

Dwelling Policies (DP-1, DP-3)

Dwelling policies are common for rental or vacant properties. DP-1 is a basic named-perils/no-frills policy, while DP-3 is an open perils policy for the building (with named perils for contents). Investors who flip properties or hold homes in renovation may find DP series useful during turnover, but vacancy rules, named-peril limitations, and excluded perils must be carefully managed.

Commercial General Liability (CGL) and Contractor Insurance

Contractors should carry CGL and workers’ compensation. Owners should verify certificates of insurance (COIs) and require contractors to name them as additional insureds on their CGL policies. If a contractor’s negligence causes damage, their CGL may respond; without proper COIs and additional insured endorsements, owner recovery can be complicated.

Builder’s Liability and Professional Liability

For larger projects, professional liability (errors and omissions) may be relevant for architects, engineers, and sometimes builders. Builder’s liability or wrap-up insurance can centralize project liability coverage on big builds.

Course of Construction, Soft Costs, and Delay in Start-Up

Some builders risk forms include soft-costs coverage (architect fees, permits, interest on loans) and delay-in-start-up coverage (lost rental income or sales revenue due to a covered delay). These coverages are crucial for commercial and investment projects where time equals money.

Specialized Policies: Vacant Home, Flood, Earthquake, Windstorm

Standard builders risk or HO policies do not cover flood or earthquake unless specifically endorsed. If your site is in a flood zone or seismic area, you’ll need NFIP, private flood, or earthquake endorsements in addition to general builders risk. Vacant homes may be subject to high-risk endorsements or require a vacancy policy.

Named perils vs open perils — what matters on a job site

Policies are written either on a named perils basis (covering only listed causes of loss) or on open-perils/all-risk basis (covering everything except specifically excluded causes). Builders risk is often written broad form (open perils) to cover many potential construction exposures. In contrast, cheap DP-1 or basic forms are named perils and may exclude many modern construction risks. For renovation and new construction, prefer open-perils coverage where practical; if you must use a named-perils form, make sure it includes the highest-likelihood risks for your area (fire, theft, vandalism, wind, collapse).

When should you buy builders risk instead of relying on homeowners insurance?

Buy builders risk when the project materially changes the risk profile of the property. Specific triggers include:

• Structural work that exposes interior framing (roof off, walls down).
• Major additions or new construction where the property will not be occupied normally.
• Extended vacancies while work is underway (most HO policies restrict coverage for properties vacant more than 30–60 days).
• Large-value material stored on-site (custom cabinetry, appliances, roofing materials) at risk of theft or water damage.
• Lender requirement: lenders often demand builders risk naming them as loss payee for construction loans.

Builders risk is not always necessary for minor cosmetic work, routine repairs, or short projects that do not change occupancy. But if in doubt, contact your insurer early. The cost of builders risk is generally modest relative to the exposure for medium- to large-scale projects.

What builders risk covers (and doesn’t cover)

Common inclusions:

• Physical loss or damage to the structure under construction.
• Materials and supplies on-site, in transit, and sometimes in temporary storage.
• Limited debris removal after a covered loss.
• Soft costs, testing, and commissioning (if endorsed).

Common exclusions or gaps to watch for:

• Normal wear and tear, faulty workmanship not causing a covered collapse, and inherent vice.
• Contractor tools and equipment (unless scheduled or endorsed).
• Employee theft or dishonest acts unless endorsed.
• Flood and earthquake (unless added by endorsement or separate policy).
• Professional liability for design defects (separate E&O policy).

Renovation and remodeling: homeowner policy considerations

If you live in the home during renovation, your homeowners policy may continue to respond for some losses but will likely require notice and possibly an endorsement for higher liability or coverage limits. Key issues include:

• Occupancy and vacancy rules: Partial vacancy rarely triggers a full vacancy clause, but if rooms are uninhabitable or the property is vacant for extended periods, standard HO coverage can be limited or cancelled.
• Contractor activity: Insurers expect licensed contractors with COIs; homeowners should require subcontractors provide COIs and name the homeowner as additional insured when work could damage adjoining property or create liability to third parties.
• Staged materials: High-value items stored in the yard or on-site may not be covered for theft without a builders risk or scheduled personal property endorsement.
• Liability exposure: With workers and visitors on-site, increase liability limits or add an umbrella policy to accommodate higher third-party injury risk.

Small renovations vs major renovations

For painting, flooring, or appliance replacements, a homeowners policy typically suffices. For roof replacement, room additions, or gut renovations, discuss builders risk or a short-term endorsement with your insurer. Even when the HO policy remains in force, insurers may require temporary endorsements for the project period.

Flips and fix-and-flip insurance: protecting profit, timelines, and materials

Flippers and real estate investors often face unique challenges: properties can be vacant, partially gutted, and stocked with materials — a recipe for higher risk. Options commonly used by investors include:

Dwelling Fire (DP) Policies

DP-1 (basic) can be inexpensive but offers narrow named-perils coverage. DP-3 (special) usually provides open-perils building coverage — a better choice during renovation if replacement-cost coverage is also available. However, DP policies have vacancy clauses and may limit coverage during periods when the property is undergoing major renovation.

Vacant Home Insurance

If a flip involves extended vacancy, obtain a vacant dwelling policy. These policies are tailored to empty homes and typically require higher premiums, strict security measures, and clear terms for the period of vacancy.

Builders Risk for Flips

Some flippers buy builders risk for short-term projects, especially when the property is being substantially remodeled or when materials and subcontractors are on-site. Builders risk can be written to cover the investor’s interest only and can sometimes be cheaper and broader than trying to maintain an HO or DP policy under risky conditions.

Business Interruption and Soft Costs

Flips are businesses. Standard property policies rarely cover lost business profit from delayed sale, but builders risk with delay in completion or soft-costs endorsements can provide partial protection. Investigate products written for real estate investors that capture business interruption tied to construction delays.

Contractor insurance, certificates, and additional insureds

Contractors’ CGL and workers’ comp are essential. Homeowners and investors should:

• Require COIs before work starts and verify them directly with the insurer when in doubt.
• Require contractors to add the property owner as an additional insured on the CGL policy to provide direct rights against the contractor’s insurer for covered claims.
• Confirm waiver of subrogation endorsements to prevent contractors’ insurers from pursuing the property owner after a loss if the contractor’s acts caused damage.
• Check limits: general contractor limits of $1M may be standard, but large projects may require higher limits.

Remember: a contractor’s COI does not relieve the owner’s responsibility to hold appropriate property insurance for the building and materials.

Valuation: replacement cost vs actual cash value during projects

Replacement cost (RCV) reimburses the cost to replace damaged property without deduction for depreciation, subject to policy limits and conditions. Actual cash value (ACV) pays replacement cost minus depreciation. During renovations and new builds, RCV is preferable because materials and labor can be expensive and depreciation may not reflect the real costs to rebuild in the middle of a project.

Builders risk policies often offer RCV coverage for the structure under construction, but check wait periods and documentation requirements; some carriers pay on an ACV basis initially then reimburse depreciation when repairs are completed and proof of replacement cost is provided. To avoid cash-flow shortfalls after a major loss, ensure you understand the adjuster’s process and any holdback amounts.

Deductibles and percentage deductibles for named storms

Deductibles can be flat-dollar or percentage-based. For hurricane or named-storm exposures, insurers often use a percentage deductible (e.g., 2%–5% of dwelling limit) that can be substantial for high-value properties under renovation. When calculating the impact on a project, convert percentage deductibles into dollar amounts and plan for financing potential losses. If your project is financed, lenders may insist on specific deductible structures or require a lower deductible as a condition of the loan.

Natural hazards: flood, earthquake, wildfire, and coastal storms

Many builders risk and HO policies exclude flood and earthquake by default. For projects in flood zones, the NFIP or private flood insurance is necessary. For seismic zones, earthquake/seismic endorsements or standalone policies are required. Wildfire-prone regions often feature higher premiums, non-renewal risk, and special underwriting scrutiny around defensible space and building materials.

If your renovation involves replacing siding, roofing, or landscaping that affects wildfire risk mitigation, document mitigation steps (ember-resistant vents, non-combustible siding, defensible space) and provide this documentation to underwriters — premiums and insurability can improve markedly with proof of mitigation.

Inspections, underwriting, and documentation that matter

Underwriters reviewing construction and renovation projects will ask for plans, budgets, contractor licenses, and safety protocols. Common requirements include:

• Project scope and estimated completion date.
• Contractor license and COIs for subcontractors.
• Construction materials list and storage plans.
• Security measures (alarms, fencing, on-site storage containers).
• Electrical, plumbing, and major system upgrade plans.

Photographic documentation before, during, and after the project helps when filing claims. Keep invoices, serial numbers for major appliances, and delivery logs to speed claims handling and reduce dispute risk.

Filing a claim during or after construction — practical tips

Prompt action improves claim outcomes. Steps to follow:

1. Ensure safety and mitigate further damage (tarping roofs, boarding windows). Keep documentation of mitigation expenses — many policies reimburse reasonable mitigation costs.
2. Contact your insurer immediately and report the loss. Provide a summary of the project, contractor info, and timeline.
3. Preserve damaged items for adjuster inspection but take photos and measurements first.
4. Get written estimates from licensed contractors for repair or replacement.
5. If a contractor’s negligence is suspected, gather COIs and additional insured proof to coordinate claims between the owner’s insurer and the contractor’s insurer.
6. Keep a written record of claim communications and timelines to avoid denial due to missed deadlines.

Denied claims often involve failure to notify the insurer, unpermitted work, contractor fraud, or policy exclusions (e.g., vacancy). Avoid these pitfalls by clear communication with your insurer and by following local permit requirements.

Underinsurance and coinsurance penalties

Underinsuring a property can lead to a coinsurance penalty at claim time. Coinsurance typically requires that a property be insured to a certain percentage of its replacement cost (often 80%). If you insure for below that threshold, the insurer may reduce claim payments proportionally. This issue is particularly relevant during renovations where the rebuilding cost can increase dramatically as you upgrade materials and finish levels. Reassess policy limits as soon as you approve material upgrades, structural changes, or scope expansions.

How premiums are priced during renovation and construction

Insurers price premiums based on a mix of factors including: construction type, materials, project value, location (flood/quake/wind exposures), occupancy status, security measures, contractor qualifications, claims history, and policy limits/deductibles. Active construction often raises premiums because the probability of loss increases. However, risk-mitigating actions — licensed contractors, on-site security, secured storage for materials, and limited vacancy periods — can reduce premium impacts.

Disputes, denials, and how to avoid them

Common denial reasons:

• Working without permits or violating code, which can void coverage for related damage.
• Policy exclusions (flood, earthquake, wear and tear).
• Failure to notify insurer of major renovation or vacancy.
• Contractor fraud or misrepresentation on COIs.

Prevent denials by fully disclosing project scope, obtaining required endorsements, maintaining permit records, and documenting contractor insurance. If a claim is denied, review the denial letter carefully, request the insurer’s rationale in writing, and consider appraisal or independent adjuster review if coverage is clearly implicated.

Special considerations for financed projects and lender requirements

Lenders commonly require continuous property insurance naming them as a loss payee and sometimes specifying minimum deductibles and coverage forms. For construction loans, lenders often require builders risk with the lender as mortgagee or loss payee. Additionally, lenders can force-place insurance on a property if the borrower fails to maintain coverage — force-placed policies are expensive and usually provide limited protection favoring the lender’s interest. To avoid force-placed insurance, provide proof of sufficient, continuous coverage to your mortgage servicer and ensure escrow accounts are funded when required.

Transitioning insurance after project completion

After construction or renovation, promptly update your policy to reflect the finished home’s increased value and new systems. Replacement cost estimates should be recalculated to avoid future underinsurance. If you used builders risk during construction, secure a permanent homeowners or dwelling policy for post-completion occupancy. For investors, switch to landlord insurance or a DP-3 if you plan to rent. Update scheduled personal property lists and increase liability limits if occupancy changes or if the property will host short-term rentals.

When contractors’ insurance gaps become your problem

Even with COIs, coverage gaps can surface: expired COIs, umbrella policy limits exhausted by a claim, or business practices that exclude certain losses. Owners should consider additional insured status and waivers of subrogation but also maintain their own robust property and liability coverage. For high-dollar projects, consider requiring higher limits from contractors and verifying policy endorsements directly with the issuing carrier to prevent misstatements on COIs.

Choosing the right insurer and agent for construction risks

Choose insurers and agents experienced in construction and renovation exposures. Look for underwriters who offer:

• Builders risk with soft-cost and delay-in-start-up endorsements.
• Understanding of vacancy policies and flip investor needs.
• Claims responsiveness and local adjusters who know construction techniques and local code requirements.

Ask for references from other owners or contractors and verify how the insurer handled losses during recent storm seasons or pandemic-related supply delays. A responsive claims function can mean the difference between a swift repair and a lengthy dispute that erodes profits.

Checklist before you start a renovation or build

Insurance and paperwork

– Notify your current insurer and ask whether the existing policy covers the planned work. If not, obtain builders risk or a renovation endorsement.

– Request contractor COIs and verify them with the issuing carrier. Require additional insured status and waivers of subrogation where appropriate.

– Confirm lender insurance requirements and provide proof of coverage to avoid force-placed policies.

Risk control

– Secure the site (fencing, locks, tamper-proof storage), document security measures, and keep inventories of materials on-site.

– Obtain required permits and keep permit files and inspection records accessible.

– Implement safety protocols and ensure contractors have workers’ compensation and safety plans.

Documentation and valuation

– Update replacement cost estimates for the post-construction dwelling limit; ensure you’re not underinsured.

– Photograph the property before work begins and keep regular photo logs of progress and stored materials.

Real-world examples and common scenarios

Scenario 1: A homeowner replaces a roof and leaves the attic exposed for several days. A sudden storm causes water intrusion and damages new insulation and framing. If the homeowner notified the insurer and had an HO policy with coverage for sudden water damage, the claim may be paid. If the insurer had been told the property would be left open and the policy was restricted, coverage could be reduced or denied.

Scenario 2: An investor completes a gut renovation and leaves the property vacant while listing it for sale. A vandalism incident occurs. If a DP-1 with narrow named perils is in place, vandalism may or may not be covered depending on the form; a vacant dwelling policy would have been a safer bet.

Scenario 3: A builder’s subcontractor accidentally starts a fire during soldering work that spreads to the adjacent property. If the subcontractor’s CGL names the property owner as additional insured, the owner’s insurer and the contractor’s insurer will coordinate, often avoiding a coverage fight.

Cost-saving tactics without sacrificing protection

– Bundle: If you have multiple properties or projects, bundling with the same carrier may yield discounts and streamline claims handling.

– Improve security: alarms, cameras, gated access, and on-site managers reduce theft and vandalism risk and can lower premiums.

– Stage investments: insure materials in transit or storage only when they arrive on site; avoid excess coverage for items off-site unless required.

– Shop mid-project: If you start with a builders risk and later move to a homeowner or landlord policy, compare multiple carriers for the permanent policy rather than automatically switching to your pre-project carrier.

Renovations, flips, and new builds each demand a proactive approach to insurance. The only reliable way to avoid costly gaps is to understand how your project changes exposure, to communicate early and often with insurers, and to document everything. Builders risk protects the structure and stored materials during active work; homeowners and dwelling policies protect occupied and rental scenarios; contractors’ CGL and proper additional-insured endorsements protect owner interests when third parties cause damage. Flood, earthquake, and other disaster coverages must be added where appropriate, and replacement cost valuation should be updated after project upgrades. With careful planning, the right mix of policies, and strong contractual controls, you can reduce the financial uncertainty of construction and keep projects on schedule and in budget. That planning starts with a single telephone call to your agent or broker — well before you break ground — so you know what’s covered, what’s excluded, and how claims will be handled if something goes wrong.