INSURANCE PLANNING FOR HOME RENOVATIONS AND CUSTOM BUILDS
Kelly Insurance Group helps high-net-worth homeowners and private clients review insurance during home renovations, gut rehabilitations, and new custom home construction — addressing builders risk coverage, soft costs, contractor insurance requirements, coverage continuity during construction, and the transition back to a permanent homeowners policy at project completion.
WHAT HAPPENS TO YOUR INSURANCE WHEN YOUR HOME IS UNDER CONSTRUCTION.
A standard homeowners policy is designed for a completed, occupied residence. When a home is undergoing significant renovation — structural work, roof replacement, full gut rehabilitation — the policy's construction exclusions can be triggered, leaving the homeowner without coverage for losses that arise during the construction period. Confirming coverage continuity with the carrier before construction begins is essential.
Builders risk insurance covers the structure and materials during construction against fire, theft, windstorm, vandalism, and certain other perils. It typically does not cover design errors, faulty workmanship by the contractor, mechanical breakdown of construction equipment, or the contractor's own tools and equipment. Understanding what builders risk does and does not cover — and coordinating the contractor's policy to fill the gaps — is part of construction insurance planning.
For a full gut rehabilitation or new custom build, a course of construction (COC) policy is the standard insurance vehicle. Unlike a homeowners policy endorsement, a COC policy is written specifically for the project — with coverage amounts that reflect the completed value of the home, named insured structure appropriate for the ownership, and coverage terms that address the specific construction timeline and scope.
Every general contractor and subcontractor on a project should provide a certificate of insurance naming the homeowner as additional insured on their general liability policy and confirming workers compensation coverage before work begins. This process protects the homeowner from liability for contractor injuries and property damage caused by contractors — but it requires active management, not a one-time request at the start of the project.
At project completion, the builders risk or COC policy must be replaced by a permanent homeowners policy before occupancy. This transition needs to be coordinated — with the new homeowners policy placed and confirmed in force before the builders risk is cancelled. The completed value of the home should be reflected in the new dwelling replacement cost, updated to reflect the renovation or new build.
RENOVATION AND BUILD COVERAGE ELEMENTS
HOMEOWNERS AND PRIVATE CLIENTS MANAGING CONSTRUCTION PROJECTS.
Any high-net-worth homeowner undertaking a significant renovation, gut rehabilitation, or custom build project needs a construction insurance review before the first contractor arrives on site.
- Homeowners undertaking major renovations — kitchen and bath rebuilds, structural additions, whole-floor projects
- Private clients completing full gut rehabilitations of high-value historic or luxury properties
- Individuals building custom homes on purchased lots who need course of construction coverage
- Homeowners adding guest houses, ADUs, or significant outbuildings to existing properties
- Any homeowner managing a project with multiple contractors and subcontractors over an extended timeline
- Clients whose renovation or build scope is significant enough that the homeowners policy may not respond to construction-related losses
SELECT YOUR PROJECT TYPE TO SEE THE RELEVANT COVERAGE CONSIDERATIONS.
Insurance requirements during a home renovation or custom build vary significantly based on the project scope, who is living in the home during construction, and the value of the property and improvements.
A major renovation of an occupied home — kitchen rebuild, structural addition, or whole-floor renovation — creates a period where the home is simultaneously a residence and a construction site. The homeowners policy may not respond to construction-related losses, and the contractor's policy may not cover the owner's property. Builders risk coverage for the renovation scope addresses the gap.
- Builders risk for the renovation scope — materials, work in place, and temporary structures
- Contractor and subcontractor insurance requirements — certificates before work begins
- Liability for construction workers and visitors during the renovation period
- Temporary housing coverage if the renovation requires displacement
- Coverage continuity — homeowners policy review during the construction period
WHAT THE INSURANCE REVIEW COVERS.
BUILDERS RISK AND COURSE OF CONSTRUCTION
Builders risk or course of construction coverage for the construction period — placed at the appropriate value, with coverage terms that match the project scope, timeline, and ownership structure.
SOFT COSTS AND DELAY COVERAGE
Soft costs coverage for architect fees, engineering costs, permit fees, and project financing — alongside delay in completion coverage for carrying costs if the project extends beyond the planned timeline due to a covered loss.
CONTRACTOR CERTIFICATE MANAGEMENT
Review and management of contractor and subcontractor certificates of insurance — confirming that every party on the project carries adequate general liability and workers compensation coverage, with the homeowner named as additional insured.
TRANSITION PLANNING — BUILDERS RISK TO HOMEOWNERS
Coordination of the transition from builders risk coverage to a permanent homeowners policy at project completion — with updated replacement cost reflecting the completed renovation or new build, and coverage confirmed in force before occupancy.
FOUR CONSTRUCTION INSURANCE MISTAKES THAT COST HOMEOWNERS SIGNIFICANTLY.
The most common and most costly assumption. A fire during a renovation, a structural collapse from improper work, or a theft of materials may not be covered under a homeowners policy with standard construction exclusions. Confirming coverage before work begins is not optional.
A contractor who begins work without providing a certificate of insurance — or whose certificate shows inadequate limits or a policy that has since lapsed — creates uninsured exposure for the homeowner. Certificate collection and verification should happen before the first day of work, not during the project.
A builders risk policy that does not include soft costs coverage leaves the homeowner exposed to repeated architect, engineering, and permit fees if a major loss requires a rebuild during construction. For high-value projects with significant soft cost exposure, this coverage should be explicitly confirmed.
A homeowner who moves into a completed custom home before the permanent homeowners policy is in force — because the builders risk policy was cancelled and the new homeowners policy was not yet placed — is living in an uninsured home. The transition must be planned and confirmed before occupancy.
QUESTIONS THAT OFTEN COME UP.
Does my homeowners policy cover my home during a renovation?
Not fully. Standard homeowners policies contain exclusions for losses arising from construction activity. The extent of the gap depends on the scope of the renovation and the specific policy language. For significant renovations, confirming coverage with the carrier before work begins — and placing builders risk coverage where the homeowners policy is insufficient — is the appropriate approach.
What is builders risk insurance?
Builders risk insurance covers a structure under construction or renovation against fire, theft, windstorm, vandalism, and certain other perils. It is the standard insurance vehicle for the construction period — either as a standalone policy or as an endorsement to the homeowners policy for smaller projects.
What are soft costs and why do they need to be covered?
Soft costs are the non-physical costs of a construction project — architect and engineering fees, permit fees, project management, and construction financing. If a major loss during construction requires the project to be rebuilt from an earlier stage, these costs are incurred again. Soft costs coverage reimburses these repeated expenses up to the policy limit.
Do I need to collect insurance certificates from my contractors?
Yes. Every contractor and subcontractor should provide a certificate of insurance confirming general liability coverage — with the homeowner named as additional insured — and workers compensation coverage before work begins. This protects the homeowner from liability for contractor-caused losses and contractor injuries on the property.
When does builders risk coverage end?
Builders risk coverage typically ends at project completion — when the certificate of occupancy is issued or the structure is occupied, whichever comes first. The transition to a permanent homeowners policy must be planned and confirmed before this point to avoid a gap in coverage.
Should the new homeowners policy reflect the renovation's added value?
Yes. A completed renovation that adds significant value to the home — through new construction, upgraded finishes, or expanded square footage — should be reflected in the dwelling replacement cost on the new homeowners policy. Failing to update the replacement cost after a major renovation is one of the most common sources of underinsurance.
READY TO START?
Tell us about your situation and a member of the team will be in touch.
COVER THE HOME DURING CONSTRUCTION — NOT JUST AFTER IT'S FINISHED.
Kelly Insurance Group can help homeowners review builders risk coverage, soft costs, contractor certificate management, and coverage transition planning for renovations, gut rehabilitations, and new custom home construction.
The availability of coverage and eligibility for coverage can depend on numerous factors. We cannot guarantee that all customers, individuals, and businesses looking for coverage will be successful in these efforts when contacting our team. All policy coverages and terms need to be fully reviewed by the respective consumer to ensure the coverage asked for is what is specifically being quoted or provided by any insurance policy. Insurance Policies, Coverage Changes, and their terms and conditions are not bound or altered until written confirmation is provided by one of our licensed team members or underwriters. This page does not offer legal advice, legal opinions, or policy interpretations. Rather, this page is meant as a resource to help provide customers and insurance consumers with additional considerations that may help in their insurance buying or pursuit of insurance information. Kelly Insurance Group does not employ or direct attorneys.
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Disclaimer: Coverage availability and eligibility may depend on many factors, including underwriting review, carrier guidelines, policy terms, state requirements, business operations, risk characteristics, and other information provided during the application or quoting process. Kelly Insurance Group cannot guarantee that every individual, customer, organization, or business seeking coverage will qualify for, receive, or successfully place insurance coverage. All policy coverages, exclusions, conditions, limits, endorsements, and terms should be carefully reviewed by the consumer, insured, or applicant to confirm that the coverage requested is the coverage being quoted, offered, or provided. Insurance coverage, policy changes, endorsements, cancellations, and other policy terms are not bound, changed, confirmed, or altered unless and until written confirmation is provided by a licensed Kelly Insurance Group team member, the applicable insurance carrier, or an authorized underwriter. This page is provided for general informational purposes only and does not provide legal advice, legal opinions, insurance coverage opinions, or policy interpretations. Information on this page should not be relied upon as a substitute for reviewing the actual policy language or consulting appropriate professional advisors. Kelly Insurance Group does not employ, supervise, or direct attorneys.