Most homeowners assume their homeowners insurance covers them during a renovation. This assumption is partially correct and dangerously incomplete. Standard homeowners policies exclude specific events during construction, reduce coverage in some scenarios, and sometimes void coverage entirely if work exceeds defined scope without notice to the insurer. The coverage gap during renovation is one of the most common sources of uncovered losses in residential claims. Knowing what your insurance actually covers — and what it doesn't — before work begins is essential.
This guide is part of the Know Before You Hire series. At Home Services Co, our renovation projects include guidance on insurance coordination.
What homeowners insurance typically covers. Damage to existing structures from fire, theft, vandalism, certain weather events (depending on policy). Contents (your belongings) under similar perils. Liability for injuries to non-residents on the property. Loss of use if the home becomes uninhabitable due to covered perils. These coverages apply during ordinary residence, not automatically during renovation.
What homeowners insurance typically excludes during renovation. Damage to work in progress (the new addition not yet completed). Damage caused by construction activities (workers accidentally dropping tools through wall, cutting wrong pipes, causing water damage through improper work). Damage to materials staged on the property before installation. Liability for injury to construction workers (should be contractor's workers comp). Theft of materials during construction. Vandalism during construction in some policies. These exclusions matter because these are exactly the risks most likely to occur during a renovation.
The contractor's liability insurance. The contractor's GL policy should cover damage they cause during their work. But this is the contractor's insurance, not yours — you're relying on them to have it, to maintain it during the project, and to honor claims through it. Gap: what if the contractor's GL is inadequate or they dispute the claim? Gap: what if damage is caused by factors neither you nor the contractor controlled (e.g., sudden storm during construction)? See verify contractor insurance.
The builders risk insurance option. For significant projects, builders risk insurance specifically covers work in progress. It's a separate policy from standard homeowners, typically with a 6-12 month term, covering: the new construction itself, materials on site, damage from specific perils (fire, theft, vandalism, wind, water from unexpected sources). Builders risk policies run $300-$2,000+ depending on project scope. The contractor sometimes carries builders risk (it's part of their premium contracts), sometimes the homeowner needs to purchase it.
Notifying your homeowners insurer. When you start a significant renovation, notify your homeowners insurer. They may: add an endorsement for construction. Temporarily adjust coverage. Require you to purchase builders risk. Reduce or exclude coverage on the construction area. Change nothing if the renovation is modest. Failure to notify about significant construction can void coverage if something goes wrong during the project. The conversation with your insurance agent is a 15-minute phone call — much cheaper than uncovered loss later.
Scope that definitely requires insurer notification. Significant structural changes. Additions. Roof replacement. Major systems replacement (full rewire, repipe, HVAC full replacement). Any project involving occupancy changes (e.g., adding a suite or converting space to separate living area). Most cosmetic work (painting, flooring, minor updates) doesn't require notification but doesn't hurt to check.
The occupancy question. If you're vacating the home during significant renovation, insurance treats this differently. Vacant homes have increased theft and vandalism risk, reduced fire-response odds. Policies often require endorsement or special treatment for vacancy. If you plan to live elsewhere during major work, tell your insurer. Vacant home insurance may be needed.
Coordinating contractor insurance with yours. The goal: the contractor's insurance covers their work and their workers. Yours covers your existing property and contents. Builders risk (if applicable) covers work in progress. Homeowners policy continues to cover existing structure and liability for your non-construction activities. Gap in any of these is where uncovered losses happen.
Specific scenarios. Scenario: worker cuts wrong pipe, causing water damage to finished first-floor ceilings and furniture. Coverage: contractor's GL should cover. Homeowner's policy covers as backup if contractor GL fails. Worker's own injury: contractor's workers comp. Fire damage to construction in progress: builders risk if purchased; contractor's GL if caused by their actions; potentially your homeowners policy if random. Theft of new appliances stored on site before installation: builders risk if purchased; potentially not covered otherwise.
Red flag #1: contractor refusing to add you as additional insured on their policy. For significant projects, being named as additional insured on the contractor's GL provides direct claim rights. A contractor unwilling to do this is a contractor unwilling to give you direct claim access. See verify contractor insurance.
Red flag #2: contract language releasing contractor from liability. Clauses that 'hold contractor harmless for any damage' or 'homeowner bears all risk during construction' are contractual attempts to transfer insurance gaps to you. Negotiate these out or walk. See spot a bad contract.
Red flag #3: no discussion of insurance between you and contractor. A responsible contractor raises insurance as part of the pre-project conversation. Contractors who don't are either relying on you to handle it or don't understand the implications themselves. Either way, you need to lead the conversation.
The deductible dimension. Your homeowners insurance has a deductible. Contractor's GL has a deductible. Builders risk has a deductible. Understanding whose deductible applies to what scenarios matters. In many cases, the contractor's GL deductible applies before your homeowners insurance even comes into play. Coordinate with all parties so you know who pays first for what.
Post-renovation insurance updates. After a renovation significantly increases home value (addition, major upgrade), update your homeowners coverage. The dwelling coverage amount may need to increase to reflect rebuild cost on the renovated structure. Failure to update leaves you underinsured. This is a post-project task that's easy to forget.
Specific perils added during construction. Fire risk increases during construction (more electrical work in progress, flammable materials staged, workers with heat tools). Theft risk increases during construction (open walls, materials on site, work trucks coming and going). Water damage risk increases during construction (new plumbing lines, roof temporarily exposed). Each risk warrants thought.
The temporary nature of construction-period coverage adjustments. Many insurance changes during construction are temporary — builders risk for the project duration, vacancy endorsement for period of non-occupancy. Track the effective dates and revert coverage when the project ends. Continuing vacancy coverage after you've moved back in is unnecessary premium.
What to do if damage occurs during renovation. Document immediately with photos and notes. Notify contractor in writing. Notify contractor's insurance carrier. Notify your homeowners insurance. File claims where appropriate. Do not accept contractor's offer to 'just handle it out of pocket' before considering insurance — their out-of-pocket offer is often inadequate, and you may have better outcome through proper insurance channels.
Contractor material storage liability. Materials the contractor has purchased but not yet installed are usually the contractor's responsibility. Materials you have purchased but not yet installed are often your responsibility (unless builders risk covers). Clarify this in the contract — who owns materials and bears risk at each stage.
The mortgage lender dimension. If your home is mortgaged, the lender has insurance requirements. Significant renovation may require notifying the lender. Some lenders require builders risk for loans during construction-to-permanent financing. Lender requirements can override homeowner preference. See your lender's construction requirements.
The summary. Homeowners insurance has construction-period gaps. Contractor's GL covers contractor actions but has limits. Builders risk fills specific gaps on significant projects. Notify your homeowners insurer about significant renovations. Negotiate contract language that doesn't transfer insurance gaps to you. Coordinate coverage so there's no risk your contractor's insurance doesn't address.
At Home Services Co, our renovation work includes insurance coordination guidance. Related: verify insurance, essential contract clauses, insured vs bonded vs licensed, spot a bad contract, pricing, book, or the full series.