Your home insurance probably stops when the renovation starts

Of all the things a homeowner has to sort out before a renovation, insurance gets the least attention and carries some of the largest downside.

The reason is straightforward. Most people assume the policy they already have continues to do what it has always done. It might. But the assumption is worth testing before the work starts rather than after something happens.

Why a construction site is a different risk

A standard homeowner policy is generally underwritten for an occupied dwelling. That is the risk the insurer priced.

A house mid-renovation is a different proposition. The building may be open to weather. Materials arrive and sit on site. Trades come and go with tools and equipment. Systems are disconnected and reconnected. Sometimes nobody is living there at all.

Policies commonly contain conditions dealing with vacancy and with material changes in risk, which is the insurer's way of saying the thing they insured should stay roughly the thing they insured. Whether a particular project engages those conditions depends on the policy and the scope, and only the insurer can answer that.

I cannot tell you what your policy says. I can tell you that finding out afterwards is the expensive way to learn.

The coverage built for this

Course of construction coverage, sometimes called builders risk, is the product designed for a property while it is being built or renovated.

It exists precisely because the ordinary homeowner policy was not written for this situation. Who arranges it, who is named on it, and what it covers are contract matters, and they should be settled in the contract rather than assumed by both parties in different directions.

That last point is the failure mode. The homeowner assumes the builder has it. The builder assumes the homeowner's policy responds. Neither checks, because each believes the other has. That conversation costs ten minutes at contract stage.

Liability is a separate question

Property coverage and liability coverage answer different questions, and both matter.

Property coverage responds when the building or materials are damaged. Liability responds when somebody is injured or someone else's property is damaged. On a site with trades working, equipment operating, and in urban Metro Vancouver a neighbour within a few metres, both exposures are live.

Ask specifically who carries liability coverage, at what limits, and whether the homeowner is named where that is appropriate. Ask it as a question with an answer rather than as reassurance.

Subtrades are separate businesses

This is the gap owners most often miss, and it parallels the situation with payment that makes the builders lien holdback necessary.

The framer, the electrician, the plumber and the roofer are typically separate businesses. They are not automatically covered by the general contractor's policy, and whether they hold their own coverage is a matter of what the builder requires of them.

So the question is not simply whether your builder is insured. It is whether subtrades are required to carry coverage, at what limits, and whether proof is collected before they set foot on site. A well-run project collects certificates of insurance as a matter of course, and a builder who does this will not be offended by the question.

Materials on site

Materials delivered but not yet installed occupy an awkward position that is worth asking about explicitly.

They are on your property, but not yet part of your building. Depending on the contract and the policies involved, they may or may not be covered, and by whom is not obvious. On a project with long lead items ordered early, the value sitting on site at any moment can be substantial.

One question resolves it: if the materials delivered last week were destroyed tonight, whose policy responds? If nobody can answer immediately, that is the gap.

Moving out changes things

If the family is relocating for the duration, that is a fact the insurer needs, for two reasons.

First, vacancy conditions. An unoccupied house is a different risk and policies commonly address it directly.

Second, coverage for the people. Where you are living and what happens to your possessions during that period are their own questions, separate from what is happening to the building. We cover the practical side of relocating in should you live in your home during a renovation, and the insurance implication belongs in that decision rather than after it.

Warranty is not insurance for the work

Worth separating two things that get conflated.

Home warranty insurance in BC addresses defects in a new home after completion, under the provincial framework, and we cover it in the 2-5-10 home warranty explained. Construction insurance addresses loss and liability while the work is happening.

Different timing, different risks, different products. A project can require both, and having one says nothing about the other.

The conversation to have

Before work starts, in writing, with answers rather than assurances.

• Call your insurer, describe the actual scope, and ask whether your policy responds and what conditions apply.
• Ask whether you will be vacating, and disclose it if so.
• Ask your builder what coverage they carry and request certificates.
• Ask whether subtrades are required to carry coverage, at what limits, and whether proof is collected before they start.
• Establish who bears the risk on materials delivered to site.
• Confirm the contract says all of this rather than leaving it to be worked out later.

Frequently asked