Vacant Homeowners Policy vs. Builder’s Risk: What You Really Need During Construction
A vacant homeowners policy isn’t usually required during renovations. Builder’s risk insurance offers better, often cheaper, protection for homes under construction. Always consult a licensed broker to confirm the right coverage for your project.
When Your House Is Under Construction
Many homeowners assume that if their home is undergoing a major renovation or is temporarily unoccupied, they must purchase a vacant homeowners policy. In reality, that is not always the case. A vacant policy is typically designed for properties that are sitting empty for extended periods with no ongoing construction. Its purpose is to cover risks like vandalism, theft, or fire in a dwelling that has no active occupancy and no work being performed.
Why a Vacant Policy May Not Be Required
- Active Work on the Property: If contractors are regularly on site, the home is not technically “vacant” under most insurance definitions.
- Misaligned Coverage: A vacant policy may not address risks created by construction activities such as material theft, building collapse, or weather damage during renovations.
- Cost Inefficiency: Vacant policies often carry higher premiums for limited protection compared to more specialized coverage options.
Builder’s Risk Insurance: A Better Fit
A builder’s risk policy is specifically designed for properties under construction or renovation. It covers both the existing structure and the materials being installed, whether on site or in transit. This protection can extend to fire, theft, vandalism, and certain weather events.
Costs vary, but a builder’s risk policy is often more economical than carrying a vacant homeowners policy. On average, builder’s risk premiums may run from 1% to 4% of the total construction budget, while vacant policies are flat-rated and can be disproportionately expensive for the limited protection they provide.
Always Consult a Licensed Broker
Every project is different. The type of coverage you need depends on the scale of construction, the value of materials, and how long the property will be unoccupied. Always speak with a licensed insurance broker who can evaluate your specific situation and ensure you are properly protected.
Bottom Line
If your home is under active construction, a vacant homeowners policy is usually not the right tool for the job. Builder’s risk insurance is designed to fill the gap, offering comprehensive protection during the renovation process. Before making a decision, consult a professional who understands both insurance products and residential construction risk.