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Classifying a Project as New Construction or Remodeling

March 1, 2022

At first glance, it may seem obvious whether to consider a construction project as new construction as opposed to remodeling for purposes of obtaining builders risk insurance to cover risk of loss during construction. In reality, the distinction isn't quite so cut and dried.

For agents, it is important to understand the differences so you can explain it to your clients and quote the correct type of coverage for their projects.

In builders risk insurance, new construction is defined as construction from the ground up. Generally, a builders risk policy should be purchased before construction even begins. However, sometimes there is a need to get a policy when construction is already underway and has stopped.

When it comes to renovations, there are several different types of projects that can all be categorized as remodeling for builders risk insurance. The common denominator for all of these projects is that there was already a completed structure in place before the new construction project started.

Remodeling projects that can be covered under builders risk insurance include everything from installing a sink, changing flooring, to upgrading a kitchen or bathroom or making a major structural renovation like adding square footage. If a client purchased an existing house and intends to hire a contractor to gut it and completely renovate the property, coverage will still be classified as remodeling since there is an existing structure. Once more, home remodeling insurance can be written to include the existing structure, or to specifically cover only the renovation.

Additional coverages provided by Builders Risk Insurance:

  1. Coverage for the home while it's Vacant for more than 30 days (not included on standard property insurance)
  2. Coverage for materials (not included on standard property insurance)
  3. Coverage for people working on the home (not included on standard property insurance)
  4. Defects in the build as a result of the renovation or construction (not included on standard property insurance)

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